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Acquisition Target Screening

Build a disciplined shortlist before LOI capital, partner time, and full diligence. Filters, kill gates, scoring frameworks, and a 40-point public-info screen.

PRE-LOI PIPELINE GUIDE
40
Screen points
6
Filter stages
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First-pass report
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Not weeks per name

What acquisition target screening is

Acquisition target screening is the process of turning a longlist into a shortlist. It sits before confirmatory diligence and after thesis definition. The job is not to prove a perfect deal — it is to reject weak names fast so scarce partner hours and LOI capital go to companies that can actually clear your mandate.

Good screening is explicit. You write down filters (must-haves), kill criteria (automatic no), and scoring dimensions (nice-to-have ranking). Bad screening is gut feel plus a banker PDF: names enter the pipeline because they showed up, not because they fit.

Rule of thumb: if you cannot state the kill criteria that would eliminate a target in one sentence, you are networking, not screening.

Screening vs due diligence

DimensionTarget screeningDue diligence
GoalShortlist survivorsValidate thesis & price risk
DepthFilters + public signalsData room, management, experts
Time per companyHours to a few daysWeeks
Cost (mid-market)$0–$5K internal / $49+ structured$25K–$250K+
OutputPass / kill / watch scorecardIC memo + risk register
Error preferenceFalse negatives OK (miss a few)False positives expensive

Related deep dives: pre-LOI due diligence, acquisition due diligence, M&A diligence process.

Six-stage screening funnel

1

Thesis & mandate lock

Define sector, size (revenue/EBITDA), geography, ownership preference, and non-negotiable exclusions before any names enter the funnel.

2

Universe build

Banker lists, proprietary scrape, trade associations, competitor maps, and platform add-on adjacencies. Aim for breadth first, quality later.

3

Hard filters

Binary gates: wrong industry, wrong size band, wrong geo, public company only when you want private, or regulatory sectors you cannot own.

4

Public-info kill screen

Identity, litigation, sanctions, news red flags, obvious concentration, declining digital footprint, and ownership signals of unwillingness to sell.

5

Score & rank

Weighted scorecard on growth, quality of earnings signals, competitive position, talent, and strategic fit. Force-rank the top 10–20.

6

Outreach & pre-LOI pack

Only survivors get management meetings and a structured first-pass diligence pack. Re-kill anything that fails early Q&A.

Core filter categories

1. Mandate fit

Sector, sub-vertical, revenue/EBITDA band, geography, and buyer type (platform vs add-on vs search fund).

2. Size & growth

Scale that supports your model; growth trajectory that is not a pure turnaround unless that is the thesis.

3. Business quality signals

Recurring revenue clues, margin stability, customer logos, hiring, product velocity, and competitive noise.

4. Risk showstoppers

Material litigation, regulatory bans, sanctions, key-person fragility, single-customer dependency when public.

5. Ownership readiness

Private ownership structure, succession, PE-backed secondary, founder age/intent, or corporate carve-out signals.

6. Thesis leverage

Why you win: operational angle, channel access, tech lift, geographic roll-up, or cost synergy with platform.

Kill criteria that save months

Automatic no examples: company outside mandate size after verification; primary revenue from a banned end-market; active material litigation that can erase equity value; sanctioned owners or counterparties; clear evidence the business is already under LOI with a preferred buyer you cannot beat; or public signals of irreversible customer concentration above your risk policy.
Kill gateWhy it mattersTypical source
Wrong end-marketWastes every hour downstreamWebsite, filings, trade press
Size outside bandFund or search mandate breachEstimates, filings, job ads
Material litigationPrice and timing riskCourt dockets, news
Regulatory lockoutCannot own or operateAgency lists, licenses
Unwilling sellerNo path to closeOwnership history, statements
Thesis breakerNo value-creation angleProduct, market structure

Screen 10 targets for less than one banker lunch

Boutique multi-company screens often run $15,000–$75,000. A structured first-pass diligence pack is $49 per target — enough to kill weak names before LOI capital.

Order a report — $49    See a sample report

40-point acquisition target screening checklist

Use this as a public-info first pass. Flag Deal-Killer items immediately; High Priority items require a note before advancement; Watch items can ride with the scorecard.

A. Identity & mandate fit
Legal name, HQ, and operating entities confirmed Deal-Killer
Primary industry / NAICS / GICS matches thesis Deal-Killer
Geography within mandate Deal-Killer
Ownership type acceptable (founder / PE / corporate) High
Not a pure turnaround unless thesis is turnaround High
Platform vs add-on classification clear Watch
Brand / web presence consistent with claimed scale Watch
B. Size, growth & economics signals
Estimated revenue or employee band in range Deal-Killer
No multi-year collapse signals in public data High
Hiring pattern supports growth or stability High
Pricing power clues (premium positioning, niches) Watch
Capex intensity roughly understood for sector Watch
Working-capital profile not obviously toxic for sector Watch
Recurring or repeat revenue model (if relevant) High
C. Customers, competition & market
End-markets not banned by investment policy Deal-Killer
No public single-customer > policy limit Deal-Killer
Competitive set identified (3–8 peers) High
Differentiation story is plausible in 2 sentences High
Market growth not structurally negative High
Channel / GTM model understood at high level Watch
Customer review / NPS signals not catastrophic Watch
D. Legal, regulatory & integrity
No material active litigation that can erase equity Deal-Killer
No sanctions / denied-party hits on entities or owners Deal-Killer
Licenses required for sector appear held High
No recent major regulatory fine headlines High
IP ownership story not obviously broken (if IP-heavy) High
Environmental or safety headlines reviewed Watch
Related-party / governance red flags scanned Watch
E. People, ops & systems signals
Leadership team identifiable (not pure black box) High
Key-person risk not obviously fatal High
Facility / footprint rough map exists if ops-heavy Watch
Tech stack signals reasonable for model Watch
Employee reviews not a mass exodus pattern Watch
Supply chain fragility not already public Watch
F. Process & deal path
Seller process status known (exclusive / auction / quiet) High
Banker / advisor (if any) identified Watch
Timing window compatible with fund / search clock High
Thesis leverage vs platform or search skill is clear Deal-Killer
Scorecard filled and force-ranked vs peers High
Decision: advance / watch / kill documented Deal-Killer

Simple scoring model (example weights)

DimensionWeightWhat good looks like
Mandate fit20%Clear sector/size/geo match
Growth / trajectory20%Stable or accelerating signals
Quality / defensibility20%Niche, switching costs, reputation
Risk load20%Few kill/high flags remaining
Strategic leverage15%You can create value others cannot
Path to close5%Seller process and timing workable

Score 1–5 per dimension. Advance only names above your threshold (e.g. 3.5+) with zero open Deal-Killers. Re-score after every management call.

Traditional vs structured first-pass screening

Traditional research projectStructured first-pass report
Cost per target$1,500–$10,000+ analyst / boutique time$49
TimeDays to weeksMinutes to hours
SourcesMix of public + expert + paid DBsPublic multi-source pack
Best useFinal shortlist deep diveLonglist kill & rank
OutputCustom memoStandardized PDF sections + risks

Use cheap, consistent screens on the longlist; spend boutique dollars only after the funnel narrows. See also what is in a diligence report and financial DD.

Who uses target screening

PE / growth equity

Continuous deal flow triage for platforms and add-ons. Kill before IC bandwidth is spent.

Corporate development

Filter inbound banker books and proactive maps against strategy pillars.

Search funds / ETA

Hundreds of names → tens of conversations. Screening is the whole job early on.

Family offices

Selective direct deals without a full-time deal team need repeatable filters.

Common screening mistakes

  • No written kill criteria — every name feels "interesting."
  • Confusing activity with progress — more meetings without force-ranking.
  • Skipping public litigation / identity checks — avoidable late surprises.
  • Scoring only financials — ignoring path-to-close and strategic leverage.
  • Re-opening kills without new evidence — sunk-cost bias.
  • Running full diligence on unscreened names — the expensive way to learn no.

Shortlist with a structured first pass

Get a multi-source public-info diligence pack on any target — identity, risks, market context, and IC-ready structure — so you advance only names that clear your screen.

Order a report — $49
Or start with a free sample PDF · 3-Pack $129 for shortlists

FAQ

What is acquisition target screening?
It is the structured process of filtering a universe of companies down to a shortlist worth management meetings and LOI capital, using explicit filters, kill criteria, and scoring.
How is screening different from due diligence?
Screening decides which companies enter the pipeline. Diligence validates the ones that remain. Screening is faster, cheaper, and intentionally rejects many names early.
What should a target screen include?
Industry fit, size and growth, economics signals, customer concentration risk, legal or regulatory showstoppers, ownership readiness, and whether public information supports a believable thesis.
How long does target screening take?
A light public-info screen can take hours per company. A multi-target shortlist process often runs 1–3 weeks across a longlist of 20–100 names.
How much does target screening cost?
Banker longlists and boutique research projects often cost $15,000–$75,000 for multi-company screens. Structured first-pass reports that accelerate shortlisting start at $49 per target.
What are common kill criteria?
Wrong end-market, size outside mandate, declining growth without a turnaround thesis, extreme customer concentration, material litigation, unwilling sellers, and regulatory exposure you cannot underwrite.
When should PE firms screen targets?
Continuously as deal flow arrives, after thesis changes, when a platform needs add-ons, and before every LOI to confirm kill gates still clear.
Can public information support real screening?
Yes for first-pass filters: corporate identity, filings, litigation dockets, news, web presence, hiring signals, and market context. It does not replace management data rooms, but it eliminates weak names before you request them.

Related guides

ESG due diligence Pre-LOI Due Diligence Acquisition Due Diligence M&A Diligence Process 47-Point Checklist 100+ DD Questions Commercial DD Financial DD Operational DD What Is Due Diligence? Due Diligence Report How to value a company M&A Deal Timeline · Add-on acquisition due diligence

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