deal-analyzer

name

Deal Analyzer

description

Use this skill when the user asks to analyze a deal, term sheet, acquisition offer, partnership agreement, commercial contract, investment terms, cap table dilution, liquidation preferences, due diligence, LOI, or negotiation leverage. Triggers on phrases like is this a good deal, what should I negotiate, review this term sheet, deal red flags, acquisition offer, partnership agreement, vendor agreement, investment terms, M&A, due diligence, and liquidation waterfall. Use it to classify the deal, surface economic/control risks, identify red flags, and produce negotiation priorities.

Deal Analyzer

Structured framework for evaluating deals — investment, M&A, partnerships, or commercial agreements — before signing anything.

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Step 1: Deal Classification

Identify the deal type before applying frameworks:

Type	Key Questions	Primary Risk
Fundraising (equity)	Valuation, dilution, control, liquidation waterfall	Losing too much ownership / control
M&A (sell-side)	Price, structure (cash/stock/earnout), reps & warranties, earnout risk	Getting paid less than promised
M&A (buy-side)	Hidden liabilities, customer concentration, key person risk	Overpaying or inheriting problems
Strategic partnership	Exclusivity, IP ownership, revenue share, exit rights	Locked into bad terms / IP trap
Commercial contract	Payment terms, SLAs, termination rights, auto-renewal	Operational dependency or cost trap
Licensing	Scope, exclusivity, royalty structure, enforcement rights	Undervaluing IP or losing control

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Module A: Investment / Term Sheet Analysis

Key Terms Checklist

ECONOMIC TERMS
□ Pre-money valuation: $___
□ Investment amount: $___
□ Post-money valuation: $___
□ Implied ownership: ___%
□ Option pool: ___% (pre or post? — matters for dilution)
□ Liquidation preference: ___x participating / non-participating
□ Dividend: cumulative / non-cumulative / none
□ Anti-dilution: broad-based weighted average / full ratchet / none

CONTROL TERMS
□ Board composition: founder seats ___, investor seats ___, independent ___
□ Protective provisions: what requires investor approval?
□ Information rights: what must be shared and how often?
□ Pro-rata rights: right to invest in future rounds
□ ROFR / co-sale: right of first refusal on share sales
□ Drag-along: can majority force minority to sell?

FOUNDER TERMS
□ Vesting: ___ year schedule, ___ month cliff
□ Acceleration: single / double trigger / none
□ Reverse vesting on existing shares? Yes / No

Red Flags in Term Sheets

🚩 Full ratchet anti-dilution — punitive in down rounds; fight for broad-based WA
🚩 Participating preferred with no cap — investor gets preference PLUS pro-rata on exit
🚩 Cumulative dividends — compound interest on the preferred; eats into exit proceeds
🚩 Board control shifting to investor(s) — founders lose ability to run the company
🚩 Option pool shuffle pre-money — dilutes founders before investment closes
🚩 Broad protective provisions — gives investor veto on normal operating decisions
🚩 Pay-to-play missing — existing investors can free-ride on future rounds
🚩 No acceleration on acquisition — founders leave value on the table at exit
🚩 ROFR + co-sale combo without drag-along — paralyzes secondary liquidity

Liquidation Waterfall Analysis

Scenario 1: Exit at 1x invested capital (fire sale)
  Series A Preferred: $___M at ___x = $___M out
  Founders / common: $___M remaining

Scenario 2: Exit at 2.5x post-money
  Preferred gets: [participation or convert — whichever is higher]
  Common gets: remainder

Scenario 3: Exit at 10x (strong outcome)
  At what multiple does preferred convert to common?
  Is participation capped?

Build the table: who gets what at $5M / $20M / $50M / $100M exit

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Module B: M&A Analysis

Sell-Side Deal Structure Review

PRICE COMPONENTS
□ Upfront cash: $___
□ Stock: ___% (what's the vesting cliff? lock-up period?)
□ Earnout: $___M over ___ years, tied to: ___
□ Escrow/holdback: ___% for ___ months (covers reps & warranties claims)

EARNOUT RED FLAGS
🚩 Metrics you can't control after acquisition (revenue dependent on acquirer resources)
🚩 No revenue floor guarantee during integration period
🚩 Definitions can be gamed (EBITDA with aggressive cost allocations)
🚩 Short measurement window (less than 2 years is often too tight)
🚩 No acceleration if acquirer changes strategy or divests the unit

REPS & WARRANTIES
□ What are you representing about the business?
□ Survival period: how long can they come back for claims?
□ Cap on liability: typically 10-20% of deal price
□ Baskets: de minimis threshold before claims count
□ R&W insurance: is the buyer buying it? (common in PE deals)

KEY PROTECTION ASKS
□ No-shop / exclusivity: how long? 45-60 days is standard; push back on 90+
□ MAC clause: what triggers a material adverse change that lets them walk?
□ Break-up fee: if they walk, what do you get?
□ Reverse termination fee: if you walk, what do you pay?

Buy-Side Due Diligence Checklist

FINANCIAL
□ 3 years of audited financials
□ MRR/ARR reconciliation (churn, expansion, new)
□ Customer concentration: any customer >10% of revenue?
□ Deferred revenue quality: is it real or pull-forward?
□ Working capital: normalized working capital at close

LEGAL
□ Cap table: clean? Any convertibles, options, or side letters?
□ IP ownership: are all assets truly owned, not licensed?
□ Employee IP assignments: signed by everyone?
□ Open source: any GPL code that could infect the codebase?
□ Pending litigation / claims

COMMERCIAL
□ Top 20 customer contracts: change of control provisions?
□ Vendor/supplier: any single-source dependencies?
□ Customer churn cohort analysis (not just aggregate churn rate)
□ Sales pipeline: how much is real vs. hope?

KEY PERSON
□ Who leaves if founders leave? (technical, sales, ops)
□ Retention plan for critical employees post-close
□ Founder earnout / employment terms

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Module C: Partnership Agreement Analysis

Framework

VALUE EXCHANGE
□ What does each party contribute?
□ What does each party receive?
□ Is the split fair given contribution asymmetry?

CONTROL & IP
□ Who owns IP created during the partnership?
□ Who owns customer data / relationships?
□ Can either party use work product after partnership ends?

EXCLUSIVITY
□ Is there exclusivity? In what scope (geography, vertical, use case)?
□ What triggers the right to go non-exclusive?
□ What are the performance minimums to maintain exclusivity?

EXIT RIGHTS
□ Termination for convenience: notice period?
□ Termination for cause: what qualifies?
□ What happens to in-flight work and revenue at termination?
□ Transition assistance obligations?

RED FLAGS
🚩 Perpetual exclusivity without performance minimums — you're locked in forever
🚩 Partner owns customer relationships — creates dependency
🚩 IP assignment to partner on anything you build together
🚩 Auto-renewal with no notice window — suddenly locked in for another term
🚩 Unilateral right to modify terms — they can change the deal after you're in it

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Module D: Negotiation Leverage Map

FOR EACH KEY TERM, ASSESS:

[Term]
  Current position: [what they offered]
  Your ask: [what you want]
  Your BATNA: [what you do if this term doesn't move]
  Leverage: High / Medium / Low
  Trade: [what you'd give to get this]
  Walk-away: Yes / No (is this a deal-breaker if it doesn't move?)

Negotiation Priority Stack

Tier 1 — Walk-away terms (must have):
  [List 2-3 absolute requirements]

Tier 2 — Important but tradeable:
  [List 3-5 terms you want but would trade for Tier 1 wins]

Tier 3 — Nice to have:
  [List terms you'd take if offered but won't fight for]

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Deal Summary Output Template

# Deal Analysis — [Deal Name] — [Date]

## Deal Overview
Type: [Investment / M&A / Partnership / Commercial]
Counterparty: [Name]
Headline terms: [2-3 sentence summary]

## Economic Analysis
[What each party gets — build the waterfall if equity]

## Top 3 Risks
1. [Risk] — probability: H/M/L — mitigation: [how to address]
2. [Risk] — probability: H/M/L — mitigation: [how to address]
3. [Risk] — probability: H/M/L — mitigation: [how to address]

## Red Flags Found
[List with explanation of impact]

## Negotiation Priorities
Must-move: [terms]
Trade candidates: [terms]
Walk-away if: [conditions]

## Recommendation
[Proceed / Proceed with conditions / Walk away] + rationale