We have a customer representing twenty-five percent of our revenue. To avoid a flat multiple discount on our entire business, how do we structure a tiered purchase price or a contingent valuation bridge based specifically on this single customer?

Question

Tyler Smith · Accepted Answer

When you have significant customer concentration, buyers will use it to discount your entire business multiple. Do not accept a blanket haircut on your enterprise value. Instead, isolate the concentrated revenue using a pricing bridge or a tiered transaction structure. Structure the deal so that your diversified core business, which represents seventy-five percent of your revenue, is valued and paid out at your target premium multiple at closing. For the concentrated twenty-five percent, isolate those earnings and structure a separate, targeted earnout or contingent payment. This means you get paid for that customer only as they continue to generate revenue post-close. To de-risk this further, define clear operational parameters in the purchase agreement. Ensure your leadership team, organized cleanly under your Accountability Chart, maintains control over the relationship during the transition period. If the buyer changes pricing or alters the service delivery model and the client leaves, your contingent payment must accelerate and pay out in full. By segregating the concentration risk into a specific tracking mechanism, you preserve the premium valuation on the rest of your operations while giving the buyer the downside protection they require to close the deal.