Private equity entered Q3 2026 with nearly 34,000 unsold portfolio companies, according to PitchBook.

We’ve been hearing chatter for some time about the impending opening of the floodgates for sell-side deals. As we’ve seen in preceding years, that prediction hasn’t quite materialized. Yet.

Let’s think happy thoughts and assume the floodgates are indeed real and that 2026 will go down in the annals of history as the Year of Dealmaking.

If that happens, sellers will need to stand out. Private equity investors and transaction advisors will need compelling narratives that capture buyer interest and support their valuations.

In reality, investors and management teams tend to commit far fewer resources to sell-side preparation than they do to buy-side diligence. Customer analysis, in particular, often doesn’t get the attention it deserves given how important it is to understanding the health of future cash flows.

Before contemplating an exit, investors and advisors should have a clear view of two things buyers will almost certainly examine: revenue concentration and customer retention.

Strategex has supported hundreds of M&A transactions representing tens of billions of dollars in enterprise value. From that experience, we see some common shortcomings in how sellers present these two critical dynamics. We also see some fairly straightforward ways to be better prepared.

Revenue Concentration

Whether buyers will thoroughly scrutinize customer revenue concentration is a matter of when, not if. Despite this reality, many investors and advisors downplay concentration with a statement along the lines of:

“The Company has a diversified customer base across various end markets, with no customer representing more than X% of revenue.”

That statement may be true, but it doesn’t necessarily mean the customer base is diversified.

Even fairly superficial buy-side diligence can reveal that while no single customer accounts for a huge chunk of revenue, a relatively small number of customers account for a disproportionate amount of it.

In sectors like manufacturing, this type of concentration is extremely common. The top quartile of customers representing 89% of revenue is so familiar to us that we have those exact percentages embossed on the back of every Strategex business card in Silian Rail.

Downplaying concentration doesn’t make it go away. More importantly, it can leave investors and advisors unprepared when the buyer starts asking questions.

Sellers should be prepared to address:

• Historical trends in customer concentration. Has concentration increased or decreased over the last three fiscal years? What has driven the change?

• The nature of key customer relationships. Do key customers source from other vendors? Are the relationships recurring, contractual or project-based? How durable are they?

• Revenue concentration by decision maker. Do top customer relationships depend on one individual, or are there several unique and independent decision makers within the account?

In most B2B transactions, customer concentration is a fact of life. Hoping it doesn’t become a critical diligence item in the final stretch of negotiations isn’t a viable strategy.

Sellers are much better off understanding the concentration going in and being prepared to explain what it actually means for future cash flows.

Retention

Grab the CIM nearest to you and flip to the “Customers” section.

If I had a Kalshi account, I would bet there’s a statement about average customer tenure or the strength of management’s long-standing relationships with key accounts.

Our experience tells us that tenure and personal relationships are poor predictors of customer loyalty and satisfaction.

Sometimes customers tell us they’ve worked with the company for a long time. Much more often, the length of the relationship never comes up during an in-depth interview.

What customers do talk about are the commercial reasons they keep buying. Are they satisfied with the things that matter most? Does the company have advantages competitors can’t easily replicate? How difficult would it be to switch suppliers?

Those factors tell us much more about loyalty and retention than the number of years a customer has been on the books.

Yet most sellers don’t seriously assess these issues through interviews, surveys, or scorecards before going to market.

There’s another problem with leaning too heavily on management’s relationships with key accounts. It can inadvertently raise concerns about key personnel risk.

Nearly 70% of CEOs of PE-backed companies are replaced prior to exit. For founder-led companies where management plans to phase out of operations post-close, personal customer relationships can become particularly concerning, especially without a clear succession plan.

Sellers should be prepared to show buyers:

• What actually drives customer loyalty and retention, validated through direct customer insight. Does the company have ownable strengths or competitive differentiators that allow it to win and retain share?
• Historical attrition patterns and the reasons behind them. What has caused customers to leave or reduce wallet share in the past? More importantly, what has the company done about it?
• Customer retention by segment or cohort. Are certain parts of the customer base more prone to attrition? Have recent customer cohorts demonstrated stronger retention than prior ones?

Volunteering information about attrition can feel counterproductive when you’re trying to sell a company. I understand the instinct.

The problem is that the buyer is probably going to look anyway.

Just about every buy-side commercial diligence engagement we’ve led has included a deep dive on customer stickiness. Poor showings can lead to re-trades, weaker deal terms and, in some cases, broken processes.

Going into those conversations without a deep understanding of what keeps customers coming back leaves sellers flatfooted.

Do the Work Before Going to Market

The backlog of 34,000 companies isn’t going to sell itself. When the floodgates finally open (are your fingers crossed?), buyers will have options. Lots of options.

CIMs claiming a “diversified customer base” and “strong management relationships” will start to sound a lot alike.

The opportunities that stand out will have evidence behind the claims. Sellers should know why customers stay, where concentration is headed, what has caused customers to leave, and whether important relationships extend beyond management’s Rolodex.

None of this means sellers need a perfect customer story. They need to understand the story they actually have and be prepared to defend it.

Do the legwork before going to market. Otherwise, the buyer will do it for you.