Private equity · 02 · Answer

What does a private equity firm actually check during due diligence?

Whatever can be verified — and the market has been reorganising around what cannot. Since 2015, as a share of all filers, the mechanism that settles computable disputes is down 31% while the two that cover unverifiable risk are up elevenfold and two and a half times. Concentration is checked because it is priced: top-ten customers above 40% of recurring revenue carries a stated multiple penalty.

The evidence

The structural shift, same denominator, same window.

Since 2015: reps and warranties insurance up elevenfold — 4 filings to 34. Earnouts up two and a half times — 293 to 558. Working capital adjustments down 31% — 364 to 195. A working capital adjustment settles a number both sides can compute. The other two exist because something could not be settled that way.

Concentration carries a stated price.

Top-ten customers above 40% of monthly recurring revenue is reported to carry a −1.0× to −2.0× EBITDA multiple adjustment; churn above 10% carries −1.0× to −3.0×. Those are practitioner figures from a sell-side adviser, not audited, and should be treated as the shape of the penalty rather than its size.

Receivables concentration is the one that gets missed.

In every filer we examined across two sectors, receivables concentration ran higher than revenue concentration. SentinelOne: partners at 18% and 12% of revenue, 21% and 14% of receivables. Celsius: Pepsi at 43.2% of revenue and 46.2% of receivables. The cash exposure is larger and only the revenue number gets discussed.

Where a comparable is actually checkable, and where it is not.

Salesforce's acquisition of Braze is computable by anyone: $47.50 a share, about $5.66bn enterprise value, revenue in a public 10-K. PepsiCo paid $1.95bn for poppi and $1.2bn for Siete Foods and published revenue for neither. The prices are knowable; the multiples are not.

So the question worth asking about any quoted comp.

Which transaction did it come from? If the answer is not one where both numbers are public, the figure is derived, estimated or reconstructed — and the model is carrying a derivation as a fact.

What would have to be true for this to be wrong

If the target's revenue is contracted, audited and concentrated in counterparties you can call, most of the above collapses into an ordinary quality-of-earnings exercise and structure is a negotiating preference rather than a risk transfer. These figures describe deals where something material could not be verified.

Sources: SEC EDGAR full-text search and company filings, with each figure's period stated above. AI-answer measurements are CULT+MATH primary research, criteria registered before retrieval. Published 2026-10-21 by Ipalibo Da-Wariboko, CULT+MATH LLC. Figures carry the date they were pulled; where a number could not be sourced, this page says so and gives none.

This is one of six decisions covered in the private equity decision brief — each with the evidence behind it, who owns it, who it is contested with, and what would have to be true for the answer to flip.

See the brief →