In a Minnesota shareholder buyout matter, the two opposing valuation experts disagreed over the risk associated with customer concentration. One expert did not include any extra risk, while the other expert assigned a 4% risk, noting that two customers account for almost 50% of company revenue. The court was not persuaded that there was higher risk relative to competitors, noting that the expert provided no information about how concentrated the customers are for similarly situated private companies. The case includes many more valuation issues, including the income and market approaches versus an asset approach.

The case is Koch v. Koch, 2022 WL 1467980, and a case analysis and full court opinion are on the BVLaw platform.

Extra: A recent article in Business Valuation Update examines research that helps in supporting an estimate of the extra risk of customer concentration.