M&A Talk (Mergers & Acquisitions), by Morgan & Westfield cover image

M&A Talk (Mergers & Acquisitions), by Morgan & Westfield

Deal Killers and Deal Makers: A Private Equity Perspective

Jul 1, 2024
Explore deal killers and makers in private equity, including customer concentration, off-balance sheet liabilities, and cyclicality. Learn how to address risks through sales strategies and why exit planning is crucial. Gain insights into private equity fund sizes and deal requirements. Discover tips on making your company attractive to private equity and navigating creative accounting in deals.
53:11

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Quick takeaways

  • Customer concentration is a major deal killer for private equity firms, requiring proactive solutions for risk mitigation.
  • Off-balance sheet liabilities like unreported tax obligations can jeopardize deals, necessitating safeguards like reps and warranties insurance.

Deep dives

Customer Concentration - A Deal Killer

Customer concentration, where one customer contributes a significant percentage of a company's revenue, is a major deal killer for private equity firms. High customer concentration poses risks such as sudden changes in demand and payment terms impacting working capital. Generally, scrutiny increases when customer concentration exceeds 25%, with a market threshold often set at 30%. To address this risk, creative solutions like adjusting revenues distribution or implementing contingent payments can be considered to mitigate concerns and facilitate a deal.

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