Our largest corporate account represents thirty-five percent of top-line revenue, but the work is split across four distinct operating subsidiaries with separate budgets, leadership teams, and statements of work. How do we present this in due diligence so the buyer does not hit us with a monolithic concentration discount?

Question

Tyler Smith · Accepted Answer

To an analyst scanning an accounts receivable aging report, thirty-five percent tied to a single parent company looks like catastrophic concentration risk. Buyers assume a single corporate directive could wipe out more than a third of your business overnight, and they will price that risk into a heavy multiple haircut or an aggressive earnout structure.

Neutralize this perception by disaggregating the operational and financial reality. Map each subsidiary as a distinct customer in your data room. Provide separate master services agreements, distinct statements of work, independent purchase orders, and individualized billing contacts. If each subsidiary operates under its own budget authority and P&L with no centralized procurement mandate, document that explicitly.

Demonstrate operational decentralization through your Accountability Chart. Show that your account managers interact with different divisional leadership teams across those four business units. Present historical retention data showing independent project cycles, where one subsidiary expanded spend while another scaled back, proving there is no joint purchasing correlation.

If the buyer still pushes for a concentration discount, offer a targeted structural solution rather than a lower purchase price. Agree to a customer retention escrow covering only that parent entity for twelve months post-close, payable in full if revenue from those combined subsidiaries remains within fifteen percent of historical baselines. This isolates the specific risk without permanently giving away enterprise value.