Fit before the work starts

A business can look attractive and still be the wrong acquisition for you. Does this company fit what we can own, operate, and support? Let's turn a broad investment thesis into a practical first pass screen. An investment thesis is simply a clear description of the businesses you want to buy, and why you are equipped to own them. Before reviewing a target, write down your boundaries: sector, geography, earnings range, ownership position, and transaction type. Separate requirements from preferences. A requirement is something the opportunity must satisfy. A preference is something you would like, but could trade off. Our fictional buyer requires commercial services in the Southeast, one to three million dollars in adjusted EBITDA, and control. A second management layer is a preference. Now consider a fictional company: Harbor Field Services. Its teaser describes a commercial maintenance business in Georgia. It reports twelve million dollars in annual revenue and one point eight million in adjusted EBITDA. The owner is exploring a majority sale. Put the buyer's criteria beside the target's information. Check each line separately. Commercial services: an apparent match. Georgia: an apparent match. Reported adjusted EBITDA: inside the example buyer's one to three million dollar range. Majority sale: consistent with control. But each check means the teaser matches the screen. It does not mean the underlying claim has been verified. Do not mix financial measures. Revenue is not earnings. Adjusted EBITDA is not seller's discretionary earnings. Do not assume asking price equals enterprise value. Confirm the price basis. Keep the original label, the period covered, the source, and any adjustments together. Here, one point eight million is reported adjusted EBITDA for the last completed financial year. The adjustments still need review. Next, look past the headline numbers. Who are the customers? How much work repeats? Who manages delivery when the owner steps away? What equipment needs replacement? In our example, the largest customer represents thirty two percent of revenue, while the management structure and replacement spending are unknown. Those details could change the fit. Use three evidence labels: reported, supported, and unknown. Reported means somebody has stated it. Supported means you have relevant documentation, while keeping its limitations clear. Unknown means the information is missing. Financial records and customer schedules help you test the story. Do not turn missing evidence into a green check. For Harbor, the next questions should be specific. What explains the concentration in the largest customer? Who owns the key customer relationships? What is included in adjusted EBITDA? And what equipment spending is expected? Ask for the information needed to resolve these gaps before expanding the work. Finish with a decision. Pursue when the stated fit justifies a next conversation, with the open questions recorded. Park when a decisive piece of information is missing. Pass when the opportunity conflicts with a real requirement. Park Harbor until we understand customer dependence and who can run it without the owner. Management depth is optional; operational continuity still needs clarification. This is a screening decision, not an investment conclusion. Write one short decision note: apparent fit on sector, geography, earnings range, and control. Key gaps: customer dependence, management coverage, and earnings adjustments. Next action: request the supporting information, then reassess. Name an owner for that action and set a review date.

Define the terms, test the evidence, and record the next step. This is an early screen, not a decision to buy. The path forward varies. Some processes request an indication of interest: a preliminary price range and assumptions. A later letter of intent sets out more developed proposed terms. Direct negotiations may skip a separate indication of interest. Neither document means the acquisition is complete. Next, Module Two: validation and first contact.