deal-screening

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:

1. Who are your top 3 customers and what % of ARR do they represent?
2. What does the founder's role look like post-acquisition?
3. Why are you selling now vs. at $30-40M ARR?
4. How do you win against Samsara in a competitive deal?
5. What's your net revenue retention and churn rate?

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