The $25 Million Discovery Hidden in Plain Sight

The packaging company looked like a dream acquisition. 

A blue-ribbon customer list. A dominant market position. Management’s narrative painted a picture of loyal customers and a growth trajectory that seemed unstoppable.

The CIM echoed the same optimism:

• “Strong customer relationships.”
• “Well-established market presence.”
• “Significant runway for growth.”

For many deal teams, that would have been enough to move forward with confidence. 

But at T4 Associates, we’ve seen too many cases where management narratives leave out the most critical perspective: the customer’s.

That’s why our client engaged us for customer diligence, to go beyond the glossy story and uncover what was really happening in the market.

What We Found: The Missing Piece in the Story

We conducted in-depth Voice of the Customer (VOC) interviews with the target’s top 15 accounts, covering over 80% of the company’s revenue. 

What we heard confirmed part of the story, but also revealed a major risk hidden in plain sight:

• Customers respected the company’s quality and service.
  
• But they were also feeling the squeeze. Imports were flooding the market at 20–25% lower prices.
• Nearly every customer said they expected price concessions or they would shift business to these cheaper suppliers.
• Several were already in active negotiations with new vendors.

This was not a hypothetical risk. It was a ticking time bomb threatening both near-term margins and long-term revenue stability. One that only customer diligence uncovered.

The Impact: $25 Million Off the Price

Armed with this intelligence, the acquirer’s VP of M&A met with the seller. 

He laid out the findings, showing how customer sentiment and competitive pressure were already reshaping the market.

The seller’s response? Immediate acceptance of a $25 million purchase price reduction, almost 30% below the original valuation.

As Tom Taber, CEO of T4 Associates, put it:

“He knew what was on the horizon. Of course, it wasn’t disclosed in the CIM. Once it was out, his reaction was basically, ‘Yep, you got me.’”

This is the power of customer diligence: uncovering the truth that can make or break a deal.

Why Customer Diligence Matters

Stories like this aren’t rare. 

Industry research shows that 50–70% of M&A deals fail to deliver expected returns. 

A major reason? Unverified assumptions about customers.

Traditional commercial diligence often includes only a handful of customer checks, too few to capture real sentiment or competitive dynamics. 

By contrast, dedicated customer diligence goes deeper into things like:

• Retention risk - are customers loyal, or are they preparing to switch?
• Price sensitivity - can the business raise prices, or are margins under siege?
• Competitive positioning - how do customers really view the company compared to rivals?
• Growth outlook - Do customers see room for expansion, or are they skeptical of new initiatives?

Without answers to these questions, firms risk overpaying, or worse, acquiring revenue streams that erode the moment the ink dries.

Turning Customer Insight Into Advantage

In this case, customer diligence didn’t just protect the buyer, it created massive value. 

The acquirer avoided paying $25 million too much and entered the deal with eyes wide open to the competitive pressures ahead.

But beyond price adjustments, rigorous customer diligence can also:

• Identify cross-sell opportunities for faster integration.
• Surface latent dissatisfaction before it becomes churn.
• Provide a head start on post-close priorities.

In a market like today’s where multiple expansion is scarce and returns rely on operational improvements, understanding customer dynamics is no longer optional: it’s essential.

The Takeaway

What does this mean for you and your next deal? It means that it’s time to face the facts: customers hold the real story of a company’s value.

Financials matter. Market dynamics matter. But unless you know what customers think, you’re missing the most important piece of the puzzle.

The firms that want to compete and win in today’s private equity landscape know that customer diligence is the edge, it’s the difference between overpaying for a risk and uncovering hidden value in plain sight.

If you’re preparing for a transaction, let’s talk about how customer diligence can help you avoid surprises, and maybe even save you $25 million. 

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