The buyer is using our customer concentration to demand an uncapped indemnity clause specifically for any revenue losses associated with our top client. How do we limit our exposure and establish a fair indemnity cap for this specific risk?

Question

Tyler Smith · Accepted Answer

An uncapped indemnity clause is a catastrophic risk for any seller, as it exposes your entire personal balance sheet to post-closing claims. When a buyer uses customer concentration to demand an unlimited indemnity for a specific client's departure, they are trying to force you to guarantee their future business success. You must firmly reject any uncapped liabilities and instead isolate this risk into a specific, capped indemnity basket. Establish a dedicated cap for this customer-related indemnity that is strictly limited to a percentage of the actual gross margin contributed by that client, rather than their total gross revenue. Additionally, negotiate a survival period for this specific representation of no more than twelve months, as any client loss after a full year under new management is an operational issue, not a pre-closing breach. Use your Accountability Chart to prove that your team has institutionalized the relationship, and show the buyer how your weekly Level 10 Meeting and client-onboarding processes keep the client locked in. By converting their open-ended demand into a capped, time-bound risk, you protect your exit proceeds while giving the buyer a reasonable, limited safety net during the initial transition period.