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What is Deal Screening?

Deal screening is the first filter in the PE investment process. Every week, PE firms receive a stream of potential investment opportunities from investment bankers, brokers, and direct outreach. These arrive as CIMs (Confidential Information Memorandums — detailed marketing documents, typically 30-80 pages), teasers (1-2 page anonymous summaries designed to generate interest), or informal descriptions from intermediaries. The screening process determines whether a deal is worth further investigation. A typical lower middle market PE firm might see 500-1,000 deals per year and invest in 2-5. That means 99%+ of deals are passed on, and efficient screening is critical. The best deal teams make this decision in 30-60 minutes per deal, not days. Screening is not deep analysis — it is a quick pattern-match against the fund’s strategy. Does this company fit our sector focus? Is it the right size? Are the financials attractive enough? Are there obvious red flags? The goal is to quickly sort deals into three buckets: Hard Pass (does not fit), Further Diligence (promising, worth a first call), or Pass (marginal, not compelling enough).

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Why It Matters

Deal screening directly impacts fund performance. Spending time on the wrong deals is opportunity cost — time spent diligencing a bad deal is time not spent finding a great one. Conversely, passing too quickly on a deal that turns out to be a winner is the PE professional’s nightmare. At firms like Thoma Bravo, Vista Equity Partners, and Insight Partners (technology-focused), screening criteria are highly refined around software metrics. At generalist firms like KKR or Apollo, criteria are broader but equally disciplined. Every firm develops its own “pattern” for what constitutes an attractive deal.

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Key Concepts

TermDefinition
CIMConfidential Information Memorandum — a detailed marketing document prepared by the seller’s investment bank, describing the company, financials, market, and investment highlights
TeaserA 1-2 page anonymous summary of a deal opportunity, used to gauge buyer interest before revealing the company’s identity
Investment CriteriaThe fund’s predefined parameters for acceptable deals: sector, size, geography, growth profile, margins, valuation range
Platform vs. Add-onA platform is a new standalone investment; an add-on is a smaller acquisition bolted onto an existing portfolio company
Customer ConcentrationThe risk that too much revenue depends on a few customers (e.g., top customer = 30%+ of revenue)
Seller MotivationWhy the owner is selling — retirement, partnership disputes, growth capital needs, or financial distress each carry different implications

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How It Works

1

Extract Deal Facts

From the provided CIM, teaser, or description, extract: company name, location, sector, description, financials (revenue, EBITDA, margins, growth rate), deal type (platform, add-on, recap, minority, carve-out), asking price/valuation, seller motivation, management status (rolling or exiting), key customers, and obvious risks.
2

Screen Against Criteria

Apply the fund’s investment criteria in a pass/fail scorecard covering: revenue range, EBITDA range, EBITDA margin, growth profile, sector fit, geography, deal size/EV, valuation multiple, customer concentration, and management continuity.
3

Quick Assessment

Deliver a 3-part assessment: (1) Verdict — Pass / Further Diligence / Hard Pass, (2) Bull case — 2-3 bullets on why this could be a good deal, (3) Bear case — 2-3 bullets on key risks and concerns, plus key questions for a first call.
4

Output Screening Memo

One-page screening memo suitable for sharing with partners or an IC quick screen.

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How to Add to Your Local Context

claude plugin install private-equity@financial-services-plugins
To customize the screening criteria for your fund, edit the skill file to include your specific thresholds: 
## Fund Investment Criteria
- Revenue: $10-100M
- EBITDA: $3-25M
- EBITDA Margin: >15%
- Sector: B2B software, tech-enabled services, healthcare IT
- Geography: North America
- Valuation: <12x EBITDA
- Customer concentration: No single customer >20% of revenue
You can also connect data sources like PitchBook, Capital IQ, or your firm’s CRM to auto-populate comparable transaction data during screening.

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Best Practices

Speed matters — screening should take minutes, not hours. Be direct about red flags. Do not bury concerns.
  • If financials seem inconsistent or incomplete, flag it explicitly — do not assume missing data is favorable
  • Ask for the fund’s criteria upfront if this is the first screening; save them in memory for future deals
  • Track screening decisions over time to calibrate your pass rate and identify patterns in successful vs. passed deals
  • When in doubt, take the first call — a 30-minute conversation reveals more than hours of desk research
  • Document the “why” behind passes — it helps when the same deal resurfaces later through a different intermediary