casemark/screening-acquisition-targets

Screening Acquisition Targets

When To Use

• Building an initial target universe for a corporate development team or buy-side advisory mandate
• Narrowing a broad industry landscape to a shortlist of actionable acquisition candidates
• Screening bolt-on targets for a platform portfolio company (PE add-on strategy)
• Refreshing or pressure-testing an existing pipeline against updated strategic criteria
• Identifying capability-gap or geographic-expansion targets tied to a specific thesis

Inputs To Gather

• Strategic mandate: Acquirer's stated objectives — capability fill, geographic expansion, revenue/margin accretion, vertical integration, talent acquisition, or technology platform
• Hard filters: Revenue range (e.g., $20M–$150M), EBITDA floor, employee count, HQ geography, end-market verticals, ownership type (private, PE-backed, public carve-out, founder-owned)
• Soft criteria: Cultural fit signals, customer concentration thresholds, regulatory exposure, IP portfolio relevance, management team retention likelihood
• Deal parameters: Maximum enterprise value or equity check, leverage tolerance, earn-out willingness, timeline constraints
• Source universe: Specify databases and lists to draw from (e.g., PitchBook, Capital IQ, Mergr, proprietary CRM lists, industry association directories, prior banker outreach logs)
• Exclusions: Known pass targets, companies under LOI elsewhere, sanctioned entities, competitors with anti-trust overlap [VERIFY antitrust thresholds per jurisdiction]

Workflow

1. Confirm the screening thesis

   • Restate the acquirer's strategic rationale in one paragraph. Get sign-off before filtering.
   • Translate qualitative goals ("expand West Coast presence") into measurable proxies (HQ or >30% revenue in CA/OR/WA).

2. Build the raw universe

   • Pull initial list from specified sources applying only the broadest hard filters (industry code, geography, revenue band).
   • De-duplicate by legal entity; flag subsidiaries vs. standalone companies.
   • Log universe size (e.g., "843 companies after initial SIC/NAICS + geography filter").

3. Apply tiered filters

   • Tier 1 — Quantitative knockout: Revenue range, EBITDA margin floor, ownership type, geography. Remove non-qualifiers.
   • Tier 2 — Strategic relevance: End-market alignment, product/service overlap score, capability-gap match. Score 1–5 or pass/fail.
   • Tier 3 — Deal feasibility: Estimated valuation vs. budget, known seller appetite signals, PE hold-period timing, founder age/succession triggers. Flag unknowns with [VERIFY].

4. Score and rank survivors

   • Weight criteria per mandate priorities (e.g., strategic fit 40%, financial profile 30%, deal feasibility 30%).
   • Produce a ranked list with composite score and individual dimension scores.
   • Separate into tiers: Priority (top 10–15), Secondary (next 15–25), Watch list (remainder worth monitoring).

5. Validate the shortlist

   • Cross-check Priority targets against recent news, M&A rumors, disclosed financials, and litigation searches.
   • Flag potential antitrust concerns if combined market share exceeds reporting thresholds [VERIFY HSR thresholds and filing requirements].
   • Identify any targets that are portfolio companies of the acquirer's existing investors or LPs (conflict check).

6. Prepare the screening output

   • Compile into the deliverable format below. Include methodology notes so the screening is reproducible.

Output

The screening report should contain:

• Executive summary: Mandate recap, universe size at each filter stage, final shortlist count
• Screening criteria table: Each filter listed with definition, threshold, and pass/fail logic
• Target shortlist: One-page profile per Priority target covering:
  • Company name, HQ, founding year, ownership structure
  • Revenue, EBITDA, growth rate (trailing 3-year CAGR where available)
  • Key products/services and end-market mix
  • Strategic fit rationale (2–3 sentences)
  • Preliminary valuation bracket (comparable multiples or rules of thumb — mark [VERIFY] if based on estimated financials)
  • Known deal appetite or succession signals
  • Red flags or open diligence questions
• Secondary and watch-list tables: Name, headline metrics, reason for lower ranking
• Methodology appendix: Data sources, filter sequence, scoring weights, date of data pull
• Exclusion log: Targets removed after Tier 1/2 with removal reason (useful for audit trail and future re-screening)

Quality Checks

• Every hard filter threshold traces back to a stated mandate requirement — no arbitrary cutoffs
• No target appears on the shortlist without a scored strategic-fit rationale
• Financial data points cite their source and vintage; any estimate is marked [VERIFY]
• Antitrust and conflict-of-interest flags are addressed before the list is circulated [VERIFY jurisdiction-specific filing thresholds]
• Universe funnel math is internally consistent (raw count → Tier 1 survivors → Tier 2 → Tier 3 → final shortlist)
• Ownership status is confirmed (a "private" target may have been acquired since the last database refresh)
• The report does not contain material non-public information (MNPI) unless sourced through compliant channels [VERIFY information-barrier policies]