The Biggest M&A Risk Isn’t Customer Concentration. It’s Institutional Knowledge Walking Out the Door.

Commercial diligence flagged customer concentration risk at 38% with the top client. Still, the deal closed, the CEO left in month nine, and the top client churned six months later.

This is especially painful to see here as I’ve personally nurtured professional relationships for over a decade yet I’m also involved in M&A deals, tech due diligence, PMI, RevOps, and FP&A as a fractional value advisor and via DevriX.

I know it may happen.

There’s a playbook to prevent most of that.

Never 100%, but still a lot.

It may kill transactions early on simply because of the risk factor. Or the usual clawback model with earnouts and 3-year stay periods, along with other bonus clauses for post-buy, which is also a dreadful experience for founders who are only selling because of life-changing events that force them to turn the page.

Two of our DevriX partners have been with us for a decade.
Two – for 8 years now.

We have churned through 4-5 executive teams or directors or senior managers and points of contacts in most of these relationships. Two went through acquisitions, one went public.

Keeping institutional know-how as a fractional external unit is comical, but more valuable than it seems on the surface.

External units are free to operate a small portfolio of accounts. It’s not an “either-or” relationship with an A-player CXO forced to choose between one great role and another.

But no matter the circumstances and the team composition, getting your books in order and translating the key relationships is paramount in every deal, followed by rigorous documentation of systems of record and SOPs, with an org chart that could carry these changes.