Corporate development and M&A
Acquisition screen and integration tracker. Hieu Van Nguyen
Buying a company starts with saying no to most of them. This page uses invented targets. Change the weights and the cut-off and watch the shortlist change. Then follow one invented deal after closing: the work streams that integrate people, pay, systems and budgets, and the synergies captured against what the thesis promised.
What this shows
A target screen on revenue quality, margin profile, recurring revenue mix and client concentration, with weights you can move
A ranked shortlist and the reasons each target passed or failed
An integration tracker with work streams for organization, compensation, systems and budget, each with owners, dates and status
Synergy captured against the thesis month by month, with the gap called out
Sample build: acquisition screen and integration tracker
Ten invented targets are scored on the criteria that decide whether a deal earns diligence time. Then one invented deal is followed after closing: its work streams, the synergies captured against the thesis, and whether the premium paid is still earned back.
Invented targets and an invented deal, shown for illustration. Not data from any employer or any real company.
What to try
- Press Favour margin and watch Target 5 and Target 10 drop off the shortlist. Both have thin EBITDA margins.
- Turn off the largest-client floor. Target 7 then passes, because its score is above the pass mark and only the floor was holding it back.
- Raise the pass mark to 70 and see which target is the first to fall out.
- Press a target name in the table to read its facts, how its total is built and the question to take into diligence.
Revenue quality and recurring mix carry the most weight, size and the two ratings the least.
Targets passing
5 of 10
3 dropped by a floor, 2 short of the mark
Pass mark
65
Total score out of 100
Top ranked
Target 1
workflow software, score 86.8
Changed from defaults
0
Targets that entered or left the shortlist
Shortlist
5 of 10 pass, the same shortlist as at the default settings.
Passing, in rank order: Target 1, Target 4, Target 8, Target 10, Target 5.
| Pass mark | Targets passing |
|---|---|
| 40 | 6 of 10 |
| 50 | 6 of 10 |
| 60 | 5 of 10 |
| 70 | 4 of 10 |
| 80 | 3 of 10 |
| 90 | 0 of 10 |
Ranked targets
Passing targets come first, then the rest, each group by total score. Bars: teal for 70 or more, blue for 40 to 69, amber under 40. Press a target name to open its detail below. On a narrow screen the scores scroll sideways.
| Rank and target | Total | Revenue | Margin | Recurring | Clients | Size | Fit | Integration | Result |
|---|---|---|---|---|---|---|---|---|---|
| 1.workflow software | 86.8 | 72 | 94 | 100 | 88 | 100 | 75 | 75 | Passes |
Passes. Strong recurring mix and size fits the acquirer. | |||||||||
| 2.payments software | 81.6 | 96 | 54 | 87 | 73 | 83 | 100 | 75 | Passes |
Passes. Strong strategic fit and high revenue quality. | |||||||||
| 3.customer analytics platform | 80.4 | 86 | 72 | 100 | 97 | 54 | 75 | 50 | Passes |
Passes. Strong recurring mix and low client concentration. | |||||||||
| 4.treasury workflow software | 71.8 | 46 | 33 | 100 | 93 | 88 | 75 | 75 | Passes |
Passes. Strong recurring mix and low client concentration. Margin is below the cut. | |||||||||
| 5.lending decision software | 67.5 | 100 | 46 | 100 | 23 | 46 | 75 | 50 | Passes |
Passes. High revenue quality and strong recurring mix. Revenue leans on a few clients. | |||||||||
| 6.permit and licensing software | 68.4 | 66 | 82 | 100 | 3 | 100 | 75 | 50 | Dropped by a floor |
Dropped by a floor: the largest client is 38% of revenue, above the 30% limit. It would pass on score alone. Strong recurring mix and size fits the acquirer. Revenue leans on a few clients. | |||||||||
| 7.claims data and analytics | 53.2 | 40 | 64 | 69 | 45 | 76 | 50 | 25 | Does not pass |
Falls short of the pass mark by 11.8 points. Size fits the acquirer. Hard to integrate. | |||||||||
| 8.benefits claims processing | 42.8 | 28 | 18 | 75 | 15 | 98 | 50 | 25 | Dropped by a floor |
Dropped by a floor: the largest client is 31% of revenue, above the 30% limit. Size fits the acquirer and strong recurring mix. Revenue leans on a few clients and margin is below the cut. | |||||||||
| 9.specialty pharmacy services | 36.2 | 48 | 14 | 19 | 53 | 52 | 25 | 50 | Does not pass |
Falls short of the pass mark by 28.9 points. Margin is below the cut and little revenue recurs. | |||||||||
| 10.regional clinic group | 30.3 | 26 | 30 | 37 | 4 | 100 | 25 | 0 | Dropped by a floor |
Dropped by a floor: the largest client is 35% of revenue, above the 30% limit. Size fits the acquirer. Hard to integrate and revenue leans on a few clients. | |||||||||
The same scores as a heat map. Each cell is a score from 0 to 100, and darker cells score lower. Rows are in ranked order.
| Target | Revenue | Margin | Recurring | Clients | Size | Fit | Integration |
|---|---|---|---|---|---|---|---|
| Target 1 | 72 | 94 | 100 | 88 | 100 | 75 | 75 |
| Target 4 | 96 | 54 | 87 | 73 | 83 | 100 | 75 |
| Target 8 | 86 | 72 | 100 | 97 | 54 | 75 | 50 |
| Target 10 | 46 | 33 | 100 | 93 | 88 | 75 | 75 |
| Target 5 | 100 | 46 | 100 | 23 | 46 | 75 | 50 |
| Target 7 | 66 | 82 | 100 | 3 | 100 | 75 | 50 |
| Target 2 | 40 | 64 | 69 | 45 | 76 | 50 | 25 |
| Target 6 | 28 | 18 | 75 | 15 | 98 | 50 | 25 |
| Target 9 | 48 | 14 | 19 | 53 | 52 | 25 | 50 |
| Target 3 | 26 | 30 | 37 | 4 | 100 | 25 | 0 |
Target 1: workflow software
PassesSoftware. Ranked 1 of 10. Total score 86.8 against a pass mark of 65. All facts are invented.
Facts
| Measure | Value |
|---|---|
| Revenue | $240M |
| Revenue growth | 18% |
| Existing clients spend, against last year | 108% |
| Gross margin | 76% |
| EBITDA margin | 24% |
| Recurring revenue | 85% |
| Largest client, share of revenue | 8% |
| Five largest clients, share of revenue | 28% |
| People | 1,150 |
| Integration difficulty | 2 of 5 |
| Strategic fit | 4 of 5 |
How the total is built: score times weight
| Criterion | Score | Weight | Points |
|---|---|---|---|
| Revenue quality | 72 | 20% | 14.4 |
| Margin profile | 94 | 15% | 14.1 |
| Recurring revenue mix | 100 | 20% | 20.0 |
| Client concentration | 88 | 15% | 13.2 |
| Size fit | 100 | 10% | 10.0 |
| Strategic fit | 75 | 10% | 7.5 |
| Integration complexity | 75 | 10% | 7.5 |
| Total score | 100% | 86.8 |
Why
Passes. Strong recurring mix and size fits the acquirer.
Question to take into diligence
Revenue grew 18% and existing clients now spend 108% of last year's amount. How much of the growth will repeat?
How each score and each reason is built
Scores, each from 0 to 100
| Criterion | How the score is built |
|---|---|
| Revenue quality | Half growth (0% scores 0, 25% scores 100) and half the revenue kept from existing clients (90% scores 0, 115% scores 100). |
| Margin profile | Half gross margin (30% scores 0, 80% scores 100) and half EBITDA margin (0% scores 0, 25% scores 100). |
| Recurring revenue mix | Share of revenue that renews under contract. 0% scores 0 and 80% or more scores 100. |
| Client concentration | Half the largest client's share of revenue (35% or more scores 0, 5% or less scores 100) and half the five largest clients' share (80% or more scores 0, 20% or less scores 100). |
| Size fit | Revenue from $150M to $400M scores 100. The score falls to 0 at $30M and at $900M. |
| Strategic fit | A rating from 1 to 5 set by the deal team. A rating of 1 scores 0 and a rating of 5 scores 100. |
| Integration complexity | A difficulty rating from 1 (simple) to 5 (hard). A rating of 1 scores 100 and a rating of 5 scores 0, so an easier integration scores higher. |
Recurring revenue is revenue that renews under contract. Existing clients spend more than 100 percent of last year when they expand and less when they leave or cut back. The total is the sum of each score times its weight.
Ranking: targets that pass come first, then the rest, each group by total score. Targets with the same total keep the order of the target list. A target is dropped when it breaks a floor, and a dropped target can never pass.
Reasons: a strength is a score of 70 or more and a weakness is a score under 40. At most two of each are named, best and worst first, and a criterion with no weight is left out. The diligence question is about the criterion that costs the target the most points, or about the floor it broke.
What to try
- Move the month from 9 to 12. The ERP cutover goes from at risk to late, and by month 12 the tasks that wait on it are at risk too.
- Open the Synergies tab at month 16 and read the call-out. The systems savings started five months late because of one task.
- On the Thesis check tab, set the share realised to 100% and the payback month returns to 36, exactly on the target. Set it to 80% and it moves to month 40.
- Filter the task list to late tasks and press one to see what it blocks.
The acquirer closed on an invented services and software business with about $420M of annual revenue and 2,400 people. Month 0 is the closing date.
Moving the month changes every panel below. Tasks flip between planned, late and done by fixed rules, and only the synergies captured up to this month count as captured.
Overall health
Off track
Month 14 after closing
Tasks done
24 of 34
71% complete
Late
3
Planned month passed, not done
At risk
1
Flagged, or waiting on a late task
Summary by work stream. Percent complete is tasks done divided by tasks in the work stream.
| Work stream | Tasks done | Complete | Late | At risk | Health |
|---|---|---|---|---|---|
| Organization and headcount | 6 of 7 | 86% | 0 | 0 | On track |
| Compensation and retention | 7 of 8 | 88% | 0 | 0 | On track |
| IT and ERP | 4 of 6 | 67% | 1 | 0 | Off track |
| System consolidation | 2 of 6 | 33% | 1 | 1 | Off track |
| Finance and budget | 5 of 7 | 71% | 1 | 0 | Off track |
| All work streams | 24 of 34 | 71% | 3 | 1 | Off track |
Each late task counts as 1 and each at-risk task as one half. That is divided by all tasks started or finished. Below 5% is on track, 5% up to 10% is watch, and 10% or more is off track.
Showing 34 of 34 tasks, in planned order. Press a task name to open its detail.
Tasks
| Task | Work stream | Owner role | Planned month | Status |
|---|---|---|---|---|
| Organization and headcount | Integration office lead | 1 | done | |
| Compensation and retention | Head of human resources | 1 | done | |
| Compensation and retention | Head of finance | 2 | done | |
| IT and ERP | Head of IT | 2 | done | |
| Organization and headcount | Head of human resources | 3 | done | |
| Compensation and retention | Total rewards lead | 3 | done | |
| IT and ERP | Head of IT | 3 | done | |
| Finance and budget | Controller | 3 | done | |
| Organization and headcount | Head of human resources | 4 | done | |
| IT and ERP | ERP program lead | 4 | done | |
| Finance and budget | Head of finance | 4 | done | |
| Finance and budget | Head of finance | 5 | done | |
| Organization and headcount | Head of human resources | 6 | done | |
| Compensation and retention | Total rewards lead | 6 | done | |
| Finance and budget | Controller | 6 | done | |
| Compensation and retention | Total rewards lead | 8 | done | |
| IT and ERP | ERP program lead | 8 | done | |
| System consolidation | Head of procurement | 8 | done | |
| Finance and budget | Head of finance | 8 | done | |
| Organization and headcount | Head of sales | 9 | done | |
| System consolidation | Head of human resources | 9 | done | |
| IT and ERP | ERP program lead | 10 | late | |
| Finance and budget | Controller | 11 | late | |
| Compensation and retention | Total rewards lead | 12 | done | |
| Compensation and retention | Total rewards lead | 12 | done | |
| Organization and headcount | Head of human resources | 13 | done | |
| System consolidation | Billing operations lead | 13 | late | |
| System consolidation | Data platform lead | 14 | at risk | |
| Finance and budget | Head of finance | 14 | on track | |
| Organization and headcount | Integration office lead | 15 | on track | |
| IT and ERP | Head of IT | 16 | not started | |
| System consolidation | Facilities lead | 18 | not started | |
| System consolidation | Head of IT | 20 | not started | |
| Compensation and retention | Total rewards lead | 24 | not started |
Cut over to the new ERP
latePlanned for month 10 and still open, 4 months late.
Task detail
| Item | Detail |
|---|---|
| Work stream | IT and ERP |
| Owner role | ERP program lead |
| Starts | Month 8 |
| Planned finish | Month 10 |
| Finished | Not yet |
| Waits on | Build and test the ERP data migration (done) |
| Others waiting on it | Retire the old ERP and archive its data, Move the data warehouse to one platform, Consolidate customer billing, Run the month-end close on the new ERP |
| Risk note | The month-end close dry run failed twice. |
How each status is decided
- doneIt finished in or before the month you are looking at.
- lateIts planned month is before the month you are looking at and it is not done.
- not startedIts start month has not arrived.
- at riskIt has started and is not late, but it carries a risk flag from this month or waits on a late task.
- on trackIt has started, is not late and has no flag.
The rules are checked in this order: done, late, not started, at risk, on track.
Captured to date
$6.7M
Through month 14
Planned to date
$9.0M
What the thesis promised
Gap
$2.4M
26% behind the plan
Yearly rate now
$17.0M
Plan for this month: $25.8M a year
What explains the gap
Captured synergies are $6.7M against a plan of $9.0M, a gap of $2.4M (26% behind).
- Systems consolidation: $0.9M behind plan. The task "cut over to the new ERP" was planned for month 10 and is still open, so no savings have started.
- Vendor consolidation: $0.8M behind plan. The task "merge vendor contracts and master data" finished in month 9 against a plan of month 8, so the savings started 1 month late. Only 80% of the planned rate is landing.
- Revenue synergies: $0.7M behind plan. The task "combine the sales teams and launch the joint offer" finished in month 11 against a plan of month 9, so the gains started 2 months late. Only 50% of the planned rate is landing.
The horizontal axis is months after closing. Cost savings come from headcount, vendors and systems. Revenue synergies are the extra margin from selling to the clients of both companies. A line can only start once the task it depends on is done, so a late task moves the whole line later.
By line, through the month shown. The gap splits into starting late and landing below the planned rate.
| Line | Planned | Captured | Gap | Of which started late | Of which below the rate |
|---|---|---|---|---|---|
| Headcount savings | $5.5M | $5.5M | $0.0M | $0.0M | $0.0M |
| Vendor consolidation | $1.8M | $1.0M | $0.8M | $0.5M | $0.3M |
| Systems consolidation | $0.9M | $0.0M | $0.9M | $0.9M | $0.0M |
| Revenue synergies | $0.8M | $0.2M | $0.7M | $0.5M | $0.2M |
| All lines | $9.0M | $6.7M | $2.4M | $1.9M | $0.4M |
Month by month. Amounts are in millions of dollars. Months after the one shown have no captured amount yet.
| Month | Planned this month | Captured this month | Planned to date | Captured to date | Gap to date |
|---|---|---|---|---|---|
| 1 | $0.00M | $0.00M | $0.0M | $0.0M | $0.0M |
| 2 | $0.00M | $0.00M | $0.0M | $0.0M | $0.0M |
| 3 | $0.00M | $0.00M | $0.0M | $0.0M | $0.0M |
| 4 | $0.00M | $0.00M | $0.0M | $0.0M | $0.0M |
| 5 | $0.00M | $0.00M | $0.0M | $0.0M | $0.0M |
| 6 | $0.00M | $0.00M | $0.0M | $0.0M | $0.0M |
| 7 | $0.17M | $0.17M | $0.2M | $0.2M | $0.0M |
| 8 | $0.33M | $0.33M | $0.5M | $0.5M | $0.0M |
| 9 | $0.58M | $0.50M | $1.1M | $1.0M | $0.1M |
| 10 | $0.89M | $0.73M | $2.0M | $1.7M | $0.2M |
| 11 | $1.29M | $0.97M | $3.3M | $2.7M | $0.6M |
| 12 | $1.69M | $1.23M | $4.9M | $3.9M | $1.0M |
| 13 | $1.92M | $1.32M | $6.9M | $5.3M | $1.6M |
| 14 | $2.15M | $1.42M | $9.0M | $6.7M | $2.4M |
| 15 | $2.30M | to come | $11.3M | to come | to come |
| 16 | $2.45M | to come | $13.8M | to come | to come |
| 17 | $2.60M | to come | $16.4M | to come | to come |
| 18 | $2.75M | to come | $19.1M | to come | to come |
| 19 | $2.81M | to come | $21.9M | to come | to come |
| 20 | $2.86M | to come | $24.8M | to come | to come |
| 21 | $2.92M | to come | $27.7M | to come | to come |
| 22 | $2.97M | to come | $30.7M | to come | to come |
| 23 | $3.03M | to come | $33.7M | to come | to come |
| 24 | $3.08M | to come | $36.8M | to come | to come |
| 25 | $3.14M | to come | $39.9M | to come | to come |
| 26 | $3.19M | to come | $43.1M | to come | to come |
| 27 | $3.25M | to come | $46.4M | to come | to come |
| 28 | $3.25M | to come | $49.6M | to come | to come |
| 29 | $3.25M | to come | $52.9M | to come | to come |
| 30 | $3.25M | to come | $56.1M | to come | to come |
| 31 | $3.25M | to come | $59.4M | to come | to come |
| 32 | $3.25M | to come | $62.6M | to come | to come |
| 33 | $3.25M | to come | $65.9M | to come | to come |
| 34 | $3.25M | to come | $69.1M | to come | to come |
| 35 | $3.25M | to come | $72.4M | to come | to come |
| 36 | $3.25M | to come | $75.6M | to come | to come |
The deal
| Item | Amount |
|---|---|
| Price paid | $540M |
| Value without synergies | $515M |
| Premium paid | $25M |
| Thesis target for earning it back | Month 36 |
The premium is the part of the price above what the business is worth without synergies. The thesis said synergies, less the one-time costs of getting them, would earn it back by month 36. Savings that have not started count as zero, and costs run to the budget plus the overrun to date.
Payback month
Month 38
Target: month 36. 2 months behind
The call
Behind the thesis
Synergies captured
$6.7M
Through month 14
One-time costs paid
$31.6M
Net to date: -$24.9M
Is the deal still earning the price paid?
The $25.0M premium is earned back in month 38, 2 months after the thesis target of month 36.
Still to earn back: $49.9M, which is the premium less the net position so far. At the target month the net position is $21.8M.
The net position is synergies captured so far, less the one-time costs of integrating. Payback is the first month it reaches the premium line. The horizontal axis is months after closing.
Key months. Amounts are in millions of dollars and cumulative. The last column is the net position less the premium paid.
| Month | Basis | Synergies | One-time costs | Net position | Against the premium |
|---|---|---|---|---|---|
| Month 12 | Actual | $3.9M | $24.8M | -$20.9M | -$45.9M |
| Month 24 | Projected | $28.8M | $41.6M | -$12.8M | -$37.8M |
| Month 36 | Projected | $63.4M | $41.6M | $21.8M | -$3.2M |
| Month 48 | Projected | $98.5M | $41.6M | $56.9M | $31.9M |
| Month 60 | Projected | $133.6M | $41.6M | $92.0M | $67.0M |
One-time integration costs, in millions of dollars
| Cost | Budget | Expected with overrun |
|---|---|---|
| Retention bonuses | $12.0M | $12.0M |
| Severance and role changes | $8.0M | $8.0M |
| ERP and IT work | $9.6M | $12.0M |
| Integration office and advisers | $9.6M | $9.6M |
| All one-time costs | $39.2M | $41.6M |
- Retention bonuses: Four installments of $3.0M.
- Severance and role changes: Paid as each wave of role changes completes.
- ERP and IT work: $0.8M a month in the budget. The ERP delay has pushed the real cost 25 percent over.
- Integration office and advisers: $0.4M a month for two years.
At a pass mark of 65 the screen passes 5 of 10 targets, led by Target 1. At month 14 after closing the integration is off track, with 3 tasks late and 1 task at risk. Synergies captured are $6.7M against $9.0M planned, and the premium is earned back in month 38 against a target of month 36.
How I use it
Deciding which targets deserve diligence time before spending it
Showing leadership the shortlist and why the rest were dropped
Keeping an integration honest against the thesis that justified the price