How to Screen Acquisition Opportunities

Where acquisition opportunities come from

Every acquirer's pipeline is fed by some mix of five sources, and the mix determines what screening has to do. An adviser-led process delivers a prepared memorandum and a timetable; a marketplace listing delivers a paragraph and an asking price; a direct approach delivers a conversation with an owner who was not thinking of selling; an introducer delivers a warm name and a fee expectation; and the public register delivers every company in the country with no indication of which ones are for sale. The method has to handle all five, because a team that only screens the first is competing with everyone else who received the same document.

Each source has its own selection effect, and the mandate — see how to build an acquisition mandate — is what lets you compare a business from one source with a business from another on the same terms.

Why screening fails

Three failures account for most of the good opportunities that mid-market buyers miss, and none of them is a failure of judgement.

Volume. A team receives more teasers, adverts and introductions than it can read properly, so it reads some of them properly and the rest not at all. Which ones get read is decided by the week they arrived in and who was free, not by their merit.

Inconsistency. Two people on the same team, reading the same memorandum, reach different views because they weigh the dimensions differently and have different tolerances for what the document does not say. Multiply by the number of readers and the pipeline reflects the readers rather than the market.

Selection. Everything that arrives was chosen by someone else: the adviser who decided which buyers to send the teaser to, the introducer who decided which buyer to call first. The opportunities nobody sent — because the owner never appointed an adviser, or the adviser did not know you existed — are invisible unless you go and find them.

The screening funnel

A funnel with a decision at each step, and a cap on the time spent before each one. The caps are the point: the purpose of screening is to spend judgement on the opportunities that deserve it, and the only way to do that is to spend very little on the ones that do not.

Step 1: log everything that arrives

Every teaser, advert, introduction and register match goes into one list with its source, the date and whoever sent it, before anyone forms a view. It is the step most often skipped, which is why the same business gets screened three times by three people and nobody can say what came in last quarter. A few minutes per item.

Step 2: test it against the mandate

Score the stated figures against the mandate, dimension by dimension — sector, geography, size, margin, ownership situation — and stop at the first hard limit. What the document does not state is recorded as unknown, not as a miss: an anonymised advert with revenue and no EBITDA has not failed the EBITDA range, it has not answered it. The output is a fit score and a list of gaps. Well under an hour by hand, minutes with the figures extracted for you. Anything below the threshold is passed here, with the reason recorded, and never takes up a reader's afternoon.

Step 3: a first pass on the document

For what clears the mandate, read the document properly once, in a fixed order: extract the facts, test the story against them, price the business on the facts, decide. How to analyse a CIM sets the method out in full. For a marketplace advert or a register match there is no memorandum yet, so the first pass is the filed accounts and whatever the advert states — thinner, but the same discipline. The output is one of three positions: pursue, pass, or pursue subject to specific questions. By hand this is a matter of hours for a full memorandum; it should not become days at this stage.

Step 4: ask the questions that decide it

Most first passes end in "pursue subject to questions", and the questions are the most valuable output of the whole funnel: the largest customer as a share of revenue, the evidence behind the biggest add-back, the contract terms behind the recurring-revenue claim, the real reason for sale. Send them to the adviser, the owner or the introducer as a short list, and set a date by which unanswered questions become a pass. An opportunity that cannot answer five questions in a fortnight is telling you something about the process you would be entering.

Step 5: shortlist and commit

What survives the questions goes on the shortlist, which is the list of businesses the team is prepared to spend real time on: a management meeting, an indicative offer, a site visit. The shortlist should be short — it is a commitment of the scarcest resource you have — and every business on it should carry its fit score, its first-pass position and the answers to its questions, so that the pipeline stage it moves into is entered with the evidence that stage requires.

Scoring consistently across a team

Consistency is a property of the method, not of the people. Four things make the same opportunity score the same in different hands.

• One mandate, as numbers. Every reader scores against the same ranges and limits, on the same measures — adjusted or reported EBITDA, trailing or forecast revenue — so there is nothing to interpret.
• One extraction template. The same fields pulled from every document in the same order, with "not stated" as a permitted value, so two readers start from the same facts.
• Unknowns scored as unknowns. A rule, written down, that silence is a gap and not a fail. Otherwise the cautious reader passes and the optimistic one pursues on the same document.
• A recorded reason for every decision. One line, at the time, by the person who decided. It is what makes the scoring auditable and the mandate reviewable later.

Calibrate occasionally: have two people score the same three documents independently and compare. Where they diverge, the mandate is ambiguous on that dimension, and the fix is to the mandate rather than to the people.

The rules of approaching owners directly

Direct approaches — writing to owners you found on the register or behind an anonymous advert — reach opportunities nobody else is competing for, and they carry obligations the other sources do not. The principles below are stated in concept only. The rules that apply to unsolicited electronic marketing and to the handling of personal data differ by channel and by whether the recipient is a company or an individual, and you should take professional advice before a first campaign goes out.

• Identify yourself. Every message says who is sending it, on whose behalf, and where the recipient's details came from. An approach that hides its sender is not one an owner will answer.
• Honour every opt-out, absolutely. A request not to be contacted again is recorded once and honoured by every channel and every campaign, for good. It is not a preference to be reset next quarter.
• One approach, then a cooling-off period. A business gets one approach and a fixed period of silence — measured in months — before it can be approached again, whoever on the team wants to. Repeated contact from different people at the same firm is the most common way a buyer's name becomes unwelcome in a sector.
• Never send to a guessed address. A pattern-guessed email address is not an address anyone gave you. Send to addresses you were given or have verified, and write to the registered office when you have neither.
• A cap on volume. A daily limit on outward approaches, set in advance, so a campaign cannot become a blast because a list was long.

The ethics and the effectiveness point the same way. Owners who were not thinking of selling respond to a specific, honest, one-off letter from a named person; they do not respond to the fifth generic email this month.

Keeping a record of every pass

Most of what a screening funnel produces is passes, and the record of them is worth more than it looks. A business passed on price comes back in eighteen months at a lower one; a business passed on size grows into the range; a business passed because the owner was not ready calls when they are. In each case the first thing you want is the reason you passed and the figures you passed on, and without a record you are reading the document as if for the first time — often a different person, reaching a different view.

The record also feeds the mandate review. Passes that fitted the mandate, with the reasons, show which dimension the mandate is missing; pursues that did not fit show which dimension it has wrong. A quarter's passes, read in an hour, are the best evidence you will get about whether the mandate describes the investor you actually are.

How TrueValue screens

TrueValue runs the funnel above against one mandate held as numbers. Marketplace and business-for-sale listings are read into a shared feed — one entry per business rather than per advert — scored against the mandate on what each advert states, and cross-referenced against the Companies House register to shortlist which company an anonymous advert actually is. Register screens built from the mandate are saved and re-run every night, so a company that files accounts into your size range is a new match the next morning. A memorandum uploaded to AI CIM analysis is read into the extraction template — per-year revenue, EBITDA, add-backs, concentration, owner involvement, red flags and what is missing — and scored against the mandate, with unknowns never scored as misses.

The TrueValue Agent does the overnight work: it screens what arrived, files what clears the mandate with the evidence beside it, and proposes the next step for a person to approve. Direct approaches follow the rules above by construction — every message identifies the sender and carries an opt-out that every outward path honours, a business is approached once and not again inside the cooling-off period, there is a daily cap, a guessed address is never sent to, and every first approach waits for a person to click. Every pass, with its reason, stays on the record beside the contacts and every conversation. To see what a register screen produces before signing up, the free UK target list runs one buy box against Companies House.