This post covers commercial due diligence: customer relationships, pricing power, and go-to-market health. It does not cover financial diligence (EBITDA, working capital, receivables), legal review (contracts, litigation, IP), quality of earnings, tax, operational, or technical assessment. Those layers matter. This one is overlooked.
Customer Relationships: Concentration, Stickiness, and Control
A searcher spent 90 days in confirmatory diligence learning what three hours of customer calls before the LOI would have surfaced: customer concentration made the deal impossible. What looked acceptable on paper (45% top-customer concentration) revealed itself in three conversations. All three customers had renegotiation rights tied to ownership change. Two said directly they would re-bid if a new owner came in.
This pattern repeats. Customer concentration and change-of-control risk are the first commercial kill-checks. Before the LOI, answer three questions: What percent of revenue sits in the top three customers? Which contracts have change-of-control termination or renegotiation rights? Which customer relationships are tied to specific people the acquirer plans to keep?
Concentration above 60% in the top three customers without contractual lock-in is not automatically a deal-killer, but it requires a stress-test before signing, not after. The acquirer needs to know whether those customers stay if ownership changes. A phone call answers this in 15 minutes. A 90-day diligence process answers it too late.
Pricing Power: Defensibility and Commodity Stress
Industrial pricing defensibility is not the list price on the contract. It is what the customer pays after a change of ownership and in a commodity downturn. The 2015–2016 and 2020 oil & gas downturns exposed industrial suppliers who priced on relationship rather than contract structure. Margins compressed fast. The pattern is documented and repeatable.
Three questions expose the real pricing case: What percent of contracts are fixed-price versus market-indexed or renegotiable on demand? What happened to net margins during the last commodity downturn? Can the target defend a 10% price increase to its top three customers without losing the account?
Map the target’s revenue to commodity cycle exposure. Model the top-three-customer renegotiation scenario. Compare the result to sector-average margins. If it collapses, the pricing is fragile and the acquisition thesis needs repricing. An acquirer who skips this work discovers the fragility six months post-close when the first customer renegotiates hard or a commodity dip hits.
GTM Health: Sales Retention, Pipeline Quality, Channel Partner Stability
GTM risk is invisible in financial statements and shows up 6–18 months post-close. Sales team defection, pipeline deterioration, and channel partner departure are the three mechanisms that destroy commercial cases after a deal closes. Channel partner defection post-acquisition is a documented failure mode in industrial distribution. The warning signs are in the partner contracts and the partner economics, visible pre-close if the acquirer looks.
Three questions matter: What percent of revenue is rep-dependent versus account-dependent? Which channel partners have renegotiation rights or soft exclusivity that breaks on ownership change? What is the pipeline quality: booked versus projected, proposal win rate, bid pipeline by customer segment?
Sales dependency is not a death sentence, but it requires a retention plan before close, not after. Channel partners with soft exclusivity will defect the moment a new owner changes the incentive structure. Pipeline quality matters because a target with strong historical bookings and a declining proposal rate is a warning, not a stable base. When you’ve worked through all three layers, you know whether the commercial case holds before you sign. A Signal Check runs through these questions in hours, not months. Request one here.
Three customer calls before the LOI is not diligence theater. It is the cheapest insurance in the deal.
