Deal Screening for M&A

Score and qualify acquisition targets against buyer investment criteria.

Screening Framework

Evaluate targets across five dimensions, each scored 0-100:

1. Strategic Fit (25% weight)

• Industry/sector alignment with buyer portfolio
• Geographic fit (markets, operations, customer base)
• Product/service complementarity
• Technology or capability gap fill
• Brand and market position value

2. Financial Profile (25% weight)

• Revenue scale (minimum threshold check)
• Revenue growth trajectory (3-year trend)
• EBITDA margin vs. industry benchmark
• Revenue quality (recurring vs. one-time, customer concentration)
• Working capital efficiency

3. Valuation Attractiveness (20% weight)

• EV/EBITDA vs. comparable transactions
• EV/Revenue vs. sector median
• Implied IRR at estimated purchase price
• Multiple arbitrage potential (buy low, exit higher)

4. Risk Profile (15% weight)

• Customer concentration (top 10 customers as % of revenue)
• Key-person dependency
• Regulatory exposure
• Technology obsolescence risk
• Litigation or compliance issues

5. Execution Feasibility (15% weight)

• Management team quality and retention likelihood
• Integration complexity estimate
• Competitive auction dynamics
• Seller motivation and timeline
• Financing availability

Scoring Output

Overall Fit Score: 78/100 — PROCEED TO DD

Strategic Fit:     85/100 ████████░░
Financial Profile: 72/100 ███████░░░
Valuation:         80/100 ████████░░
Risk Profile:      68/100 ██████░░░░
Execution:         82/100 ████████░░

Recommendation: PROCEED TO DD
Key Strengths: [top 3]
Key Concerns: [top 3]
Suggested Next Steps: [prioritized actions]

Thresholds

Deal-Breaker Checks (Auto-Fail)

Before scoring, check for absolute disqualifiers:

• Revenue below buyer's minimum threshold
• Negative EBITDA (unless growth-stage thesis)
• Active material litigation exceeding 20% of EV
• Sanctioned entities in ownership chain
• Industry explicitly excluded by buyer mandate

PE-Specific Criteria

For financial sponsor buyers, additionally evaluate:

• LBO feasibility: Can the deal be levered 3-5x EBITDA?
• Value creation levers: Revenue growth, margin expansion, add-ons, multiple expansion
• Exit path: IPO viability, strategic buyer universe, sponsor-to-sponsor
• Hold period returns: Target 20-25% gross IRR over 3-5 years
• Fund fit: Check size, vintage, sector focus, geographic mandate

Output Format

Provide structured JSON-compatible output with:

• overall_score: 0-100
• recommendation: proceed_to_dd | proceed_with_caution | pass
• dimension_scores: object with each dimension
• deal_breakers: list of any auto-fail conditions triggered
• strengths: top 3 positive factors
• concerns: top 3 risk factors
• next_steps: prioritized action items