Customer Mergers: Calculate the Supplier Concentration Jump

Key findings

• Combining two disjoint customer revenue shares a and b raises the customer HHI contribution by 2ab without changing total sales.
• Hypothetical customer shares of 15% and 10% become one 25% buyer and increase HHI by 0.03, or 300 points on the 10,000-point scale.
• Merger announcement and legal completion should be recorded separately; later vendor rationalization is a purchasing event rather than an automatic consequence of relabeling the graph.

Two customers can become one negotiating counterparty without changing a supplier's sales. The immediate measurable change is customer concentration, rather than lost revenue. Purchasing cuts, vendor consolidation and financing responses are separate outcomes to investigate after that change.

For event researchers, this creates a useful hypothesis: a larger mechanical concentration increase may identify suppliers whose bargaining environment changes most when customers merge.

The concentration increase has a simple expression

Let a and b be two customers' shares of the same supplier's revenue, expressed as decimals on a common period and without duplicate sales. Before consolidation their HHI contribution is the sum of squared shares. After consolidation it is the square of the combined share:

$$\Delta HHI=(a+b)^2-a^2-b^2=2ab.$$

With hypothetical 15% and 10% customers, their combined share becomes 25%. Their HHI contribution rises from 0.0325 to 0.0625: an increase of 0.03, or 300 points on a 10,000-point scale. Total supplier sales have not changed in this illustration.

A 24% customer combining with a 1% customer creates the same 25% final share but only a 0.0048 HHI increase, or 48 points. Final customer size alone misses how much independent purchasing has been consolidated.

These examples are invented customer books. They demonstrate the transformation to apply to actual historical Altsets customer edges, rather than implying a merger among any named customers.

Corporate boundaries are part of the data problem

Calculate the pre-event customer shares from one supplier and one compatible revenue period. If two records already roll up to the same ultimate buyer, adding them can count a consolidated exposure twice. If one customer is absent or unquantified, report an incomplete concentration result.

Preserve the announcement date, completion date and old entity IDs. A pending transaction need not imply unified purchasing. A completed merger may leave procurement decentralized. The graph's legal-parent consolidation and the customer's operational vendor review should therefore be separate event fields.

An M&A signal has a measurable starting point in buyer structure; its commercial consequence must then be tested. Declaring sales lost at closing assumes the very outcome the research is supposed to investigate.

Financing policy is a second outcome, not a merger arithmetic result

Research on customer horizontal mergers and supplier capital structure finds suppliers increasing leverage after significant customers merge. That motivates a financing hypothesis, but the HHI increase does not mechanically forecast new debt.

Test leverage, margins and revenue separately. Compare suppliers with large and small pre-completion concentration jumps, controlling for supplier size, existing leverage, industry demand and other financing events. Vendor overlap and supplier differentiation can explain why the same buyer consolidation produces different outcomes.

Use later relationship weights to distinguish retained business under one buyer from actual customer loss. The partial HHI analysis covers incomplete customer books, while point-in-time joins keep historical ownership boundaries and availability separate.

Sources

• Altsets supply chain dataset
• Effects of customer horizontal merger on supplier capital structure decisions
• Horizontal acquisitions and buying power

Related research

• Is Rising Customer Concentration a Growth Win or a Shrinking Business?

Methodology

Read the methodology for this research.

Cite this research

Altsets Research. "Customer Mergers: Calculate the Supplier Concentration Jump." Published September 15, 2026. https://www.altsets.com/research/customer-merger-supplier-capital-structure

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