Customer concentration of targets in mergers and acquisitions

Abstract We study how the customer concentration of targets impacts the occurrence and structure of mergers and acquisitions (M&A). We hypothesize and find that acquirers respond to customer concentration‐related risk by placing fewer bids for targets with greater customer concentration and by using more stock payment in their offers. These relations vary predictably with major customer‐related uncertainty. Our findings extend the literature by documenting an important risk factor in M&A and by quantifying the economic consequences of customer concentration.