Top Line Performance Considerations in M&A Transactions

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In middle market M&A transactions, analysis of an acquisition target’s top line performance frequently plays a prominent role in buy-side financial due diligence. After all, revenue and customers are what drive most businesses, and a buyer may view historical and prospective revenue trends as being indicative of a target’s overall attractiveness.

Examples of risk areas specific to revenue that may warrant analysis during the buy-side due diligence process include:

  • Concentrations (e.g., contract concentrations, customer concentrations)
  • Revenue recognition practices and revenue cutoff
  • Periodic fluctuations, seasonality, etc.
  • Customer relationships (e.g., length of relationship, responsible employees, attrition, contract renewals, etc.)
  • Financial terms of arrangements with customers

With respect to prospective …read more

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