Reps & Warranties: Customers & Suppliers

Essential Question:

Are there any existing customer or vendor relationships that may be at risk?

In Brief:

  • Major customer and supplier relationships.

  • Indications of the health and near-term continuance of those relationships.

Category: Continued Diligence & Fact-Finding; Risk Allocation


What is it?

A list of the customers and suppliers who have reached a set monetary threshold (e.g., customers that have spent more than $1 million annually for both of the prior two years), as well as the amounts spent annually for each customer or supplier. It’s also an affirmation that no one from that list has indicated an intention to significantly change their relationship with the business. 


When does it matter?

This representation is always useful, but it is most important when (1) a few customers and/or suppliers make up a major portion of the company’s revenue and/or supply streams, or (2) there is a lack of trust between the Buyer and Seller.


What to look out for?

Privacy and data security: To the extent that you regularly engage with digital commerce or interactions (financial or otherwise) with your customers through a digital interface or website, and the extent to which you store any personally identifiable information of your customers, you need to make sure that you understand the breadth and depth of that and can confidently answer questions. 

Warranty history: Any excessive warranty claims over a certain time period – relationship with customers, quality of product. Could look like returns, exchange, credits, recalls. 


Related Terms

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Reps & Warranties: Accounts Receivable