A promising business is not automatically the right acquisition. Acquisition criteria make that distinction practical: they turn a broad investment thesis into a short set of requirements, preferences, and questions that can be applied before a target consumes weeks of attention.
The purpose of a first screen is modest. It should establish whether there is a reason to learn more, what remains unverified, and what would make the opportunity unsuitable. It should not pretend to establish value or complete diligence. A useful screen leaves the next person with a decision they can understand, not a spreadsheet full of unexplained green checks.
This article accompanies Module 1: Pre-LOI & thesis fit. Use it to prepare the criteria and decision note before working through the video example.
Start with the business the buyer can actually own
An investment thesis is a description of the businesses a buyer wants to acquire and the reasons that buyer is equipped to own them. A sector name alone is not a thesis. “Commercial services” describes a large group of companies with different customers, staffing needs, equipment, margins, and cash requirements.
The practical question is what sits behind the sector preference. Is the buyer seeking recurring maintenance work, a particular geographic footprint, or a business that can be supported by an existing operating team? Each reason suggests a different question for the first screen. Write those reasons before reviewing an attractive teaser, while there is less temptation to move the boundaries.
An acquisition thesis also needs an ownership plan. A buyer expecting to appoint management should not screen a company as if the owner's daily work will continue indefinitely. A buyer seeking control should not quietly treat a minority investment as equivalent because the headline earnings look appealing. These are differences in the opportunity, not formatting details.
Separate requirements from preferences
A requirement is a boundary an opportunity must satisfy to advance under the current mandate. A preference is desirable but can be traded off if the rest of the opportunity makes sense. Keeping the two separate makes the screen more consistent and prevents every exception from becoming a fresh debate.
For example, a fictional buyer may require commercial services in the Southeast, $1 million to $3 million in adjusted EBITDA, and a controlling ownership position. A second management layer may be a preference. That does not mean continuity is optional. It means the buyer might consider another workable management arrangement, provided the responsibilities and costs can be understood.
| Screening question | Example requirement | What still needs clarification |
|---|---|---|
| What does the company do? | Commercial services | Customer types and the actual mix of work |
| Where does it operate? | Southeast United States | Service territory, not just registered address |
| What earnings measure is in scope? | $1M to $3M adjusted EBITDA | Period, calculation, and proposed adjustments |
| What ownership is sought? | Control | The seller's proposed transaction and any retained stake |
| Who can run it? | A workable continuity plan | Responsibilities, coverage, and cost |
These are teaching criteria, not SilverShore's public investment mandate or a recommendation for another buyer. The point is the structure: every criterion needs a definition that another team member could apply without guessing.
Preserve the label on every financial number
A listing can contain revenue, profit, EBITDA, adjusted EBITDA, seller's discretionary earnings, and an asking price. Moving those numbers into a single “cash flow” field destroys information. The first screen should preserve the source's original label, the period covered, and the date the information was supplied.
Revenue describes sales before expenses. EBITDA means earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA reflects additional adjustments that must be explained and reviewed. None of these labels, by itself, establishes the cash available to a new owner. The SEC's financial statement guide explains why income and cash-flow information answer different questions.
An asking price also needs a basis. Does it refer to the operating business, a particular ownership stake, selected assets, or a package that includes real estate? If the source does not say, record the question. Do not silently convert an asking price into enterprise value or assume financing and operating cash requirements are included.
Apply the screen to Harbor Field Services
Harbor Field Services is the fictional company used in Module 1. Its teaser describes commercial maintenance in Georgia, $12 million in annual revenue, $1.8 million in adjusted EBITDA for the last completed financial year, and an owner exploring a majority sale. Those statements appear consistent with the example buyer's sector, geography, earnings range, and control requirement.
The teaser also reports that the largest customer represents 32% of revenue. Management coverage and equipment replacement spending remain unknown. The first four apparent matches do not erase those gaps. A customer relationship and a management arrangement can affect whether the buyer can operate the company under the plan that justified reviewing it.
A first screen should produce specific questions for the next conversation, not an investment conclusion.
The useful response is not a generic request for “more information.” Ask what explains the largest customer's concentration, who manages that relationship, what is included in adjusted EBITDA, and who covers the owner's responsibilities. Request the equipment-spending context needed to understand continuity. Keep the requests proportionate to the stage and the agreed access process.
Use three evidence labels
Reported means the owner, intermediary, or another source has stated something. Supported means relevant evidence has been reviewed, with its limitations recorded. Unknown means the information is missing or insufficient. These labels describe evidence, not whether the opportunity is attractive.
Harbor's $1.8 million is initially reported adjusted EBITDA. Receiving a schedule may support how the seller calculated it, but that does not establish that every adjustment is appropriate. A customer schedule can support historical concentration without guaranteeing the customer will remain. Keep the claim and the extent of support together.
This discipline prevents confidence from increasing merely because information has been copied several times. If a number moves from a teaser to a pipeline record and then into a meeting brief, its evidence status should travel with it. Repetition is not a new source. An unanswered question should not disappear when the opportunity moves to the next stage.
Finish with pursue, park, or pass
Use pursue when the apparent fit justifies the next permitted conversation, with the open questions recorded. Use park when a decisive gap needs an answer before further work is justified. Use pass when the opportunity conflicts with a real requirement or the available evidence no longer supports continuing.
For Harbor, the lesson parks the opportunity until customer dependence and operating coverage are clearer. That is not a judgment that 32% concentration always makes a company unsuitable. It is a decision that these facts matter to this buyer and have not yet been understood. Another buyer with different capabilities might reach a different preliminary decision.
Do not use “park” as a place where opportunities disappear. Give it a reason, a next action, a responsible person, and a review date. If the answer never arrives, the record should still explain why the team did not proceed. A declined deal can be reconsidered when facts change without rewriting what was known earlier.
Write a decision note the next person can use
A short note can be more useful than a complex score. For Harbor, it could read: “Apparent fit on sector, geography, stated earnings, and control. Customer dependence, management coverage, and earnings adjustments remain open. Park pending targeted information, then reassess.” The next action should name the information requested and who will review it.
Before moving on, check that the note answers four questions: why the company appeared relevant, what the evidence actually supports, what could change the decision, and what happens next. Avoid an overall numeric score unless the underlying judgments remain visible. A high average can hide a single requirement the business does not meet.
The output of Module 1 becomes the input to Module 2. The unresolved questions shape the first conversation; the first conversation should not start from a blank page. Watch Module 1, then continue with the companion article on the first acquisition conversation.
General buyer-side education, not investment, accounting, valuation, or legal advice. The examples are fictional. Transaction-specific decisions belong with the buyer and qualified advisers.