| name | deal-screening |
| description | Private equity deal screening: market size, competitive moat, management quality, financial profile, mandate fit — first-pass evaluation before deep diligence |
Deal Screening Skill
When to activate
- Evaluating an inbound deal or CIM (Confidential Information Memorandum) quickly
- Running a first-pass screen before committing to a full diligence process
- Building a standardised deal scorecard for your investment committee
- Deciding whether to pass or proceed to management meetings
When NOT to use
- Full diligence — screening is a first pass, not a definitive assessment
- Public market investment decisions — different framework
- Formal IC presentations — use the IC Memo skill for that
⚠️ Important
Deal screens are directional assessments based on limited information. Critical assumptions must be marked [VERIFY]. Many screens are wrong — the goal is to efficiently eliminate clearly bad deals, not to perfectly evaluate the rest.
Instructions
Quick screen (30-minute version)
Screen this deal quickly. Based on the CIM/teaser provided:
Company: [name]
Sector: [industry]
Revenue: $[X]M, EBITDA: $[X]M ([X]% margin)
Growth rate: [X]% YoY
Asking price: $[X]M EV / [X]x EBITDA
Quick screen framework:
1. SIZE FIT: Is the deal within our target range ($[X]M–$[X]M EV)?
2. SECTOR FIT: Does this sector fit our mandate and expertise?
3. BUSINESS MODEL: Is this a defensible business (not a one-time project shop)?
4. FINANCIAL HEALTH: Are margins reasonable? Is growth organic or acquisitive?
5. OBVIOUS ISSUES: Any red flags (customer concentration, key person, cyclicality, tech disruption)?
Verdict: [Pass immediately / Interesting — request more info / Request management meeting]
[VERIFY] all financials against the CIM before escalating.
Full first-pass screen
Run a full first-pass deal screen.
Company overview: [describe or paste CIM summary]
MARKET
- Market size: $[X]B TAM — is it large enough for our return requirements?
- Growth rate: [X]% — is the market growing, stable, or declining?
- Cyclicality: is demand tied to macro conditions?
COMPETITIVE POSITION
- What is the moat? [pricing power / switching costs / network effects / IP / regulatory / scale]
- Market share: #[X] in market, [X]% share
- Main competitors: [list 2-3] and differentiation vs. them
- Barriers to new entrants: [high / medium / low]
MANAGEMENT
- Tenure of CEO and CFO: [X] years
- Founder-owned or PE-backed already?
- Management retention plan post-acquisition?
- Any key person risk?
FINANCIAL PROFILE
- Revenue: $[X]M ([X]% growth), EBITDA $[X]M ([X]% margin)
- Revenue quality: [recurring / transactional / project-based]
- Customer concentration: top customer [X]% of revenue, top 5 [X]%
- Churn or retention: [X]% gross / [X]% net
- CapEx intensity: [X]% of revenue — capital-light or heavy?
- Debt: $[X]M ([X]x EBITDA) — leverageable?
VALUE CREATION OPPORTUNITIES
- Organic growth levers: [pricing / expansion / new products]
- M&A potential: [fragmented market for bolt-ons?]
- Margin improvement: [cost efficiency / pricing / mix shift]
- PE value-add: [process improvement / management upgrade / governance]
ENTRY/EXIT
- Entry valuation: [X]x EBITDA — how does this compare to comparable transactions?
- Exit pathways: [strategic sale / sponsor-to-sponsor / IPO]
- Target IRR: [X]% at [X]-year hold — achievable at this entry?
PRELIMINARY VERDICT
Score each dimension: 5 = excellent, 3 = acceptable, 1 = weak
Market: [1-5]
Competitive position: [1-5]
Management: [1-5]
Financials: [1-5]
Value creation: [1-5]
Entry/exit: [1-5]
Average score: [X]/5
Recommendation: [Pass / Soft pass / Proceed with caution / Strong interest]
Key diligence questions for management meeting: [list 3-5]
[VERIFY] all financial figures and market data before presenting to IC.
Red flag checklist
Scan this deal for red flags:
[ ] Customer concentration > 25% in single customer
[ ] Key person dependency (founder is the entire sales team)
[ ] Technology disruption risk (AI replacing core product)
[ ] Cyclical revenue with 30%+ decline in last recession
[ ] Declining margins for 3+ consecutive years
[ ] Negative free cash flow despite positive EBITDA
[ ] Litigation, regulatory investigation, or environmental liability
[ ] Related-party transactions that benefit management
[ ] Seller motivation is unclear or suspicious
[ ] Prior PE sponsor exited below target returns
Flag all items present and assess severity.
Example
Teaser summary: B2B fleet management software, $12M ARR, 85% gross margin, 25% YoY growth, founder-owned, asking 10x ARR ($120M EV).
Screen output:
MARKET: Large ($8B TAM, fleet management growing with electrification tailwind) — STRONG (5/5)
COMPETITIVE: Competing with Samsara and Verizon Connect — needs differentiation explained — UNCERTAIN (3/5)
MANAGEMENT: Founder-owned single founder — key person risk flagged — MEDIUM (3/5)
FINANCIALS: 85% gross margin is excellent; 25% growth attractive; $12M ARR at 10x = $120M — aggressive at pre-profitability stage — ACCEPTABLE (3/5)
VALUE CREATION: Land-and-expand potential; EV charging integration opportunity — INTERESTING (4/5)
ENTRY/EXIT: 10x ARR is market rate for SaaS at this growth; strategic buyers (OEMs, telematics cos) = realistic exit — ACCEPTABLE (3/5)
Score: 3.5/5 — Proceed with caution
Key questions for management meeting:
- Who are your top 3 customers and what % of ARR do they represent?
- What does the founder's role look like post-acquisition?
- Why are you selling now vs. at $30-40M ARR?
- How do you win against Samsara in a competitive deal?
- What's your net revenue retention and churn rate?
