Good business
The company is worth admiring.
- Customers value what it provides.
- Demand and economics appear durable.
- The team and operations can perform.
- The company has strengths a buyer wants to own.
For Acquisition Aficionado readers
ADE — Acquisition Decision Engine
A Good Business Can Still Be a Bad Acquisition.
Pressure-test the acquisition before the LOI.
ADE evaluates price, cash flow, financing, buyer fit, transferability, risk, and evidence across Main Street, SBA-financed, and lower-middle-market acquisitions.
Start with 3 free deal screens. No credit card required.
For acquisition buyers, searchers, holdcos, independent sponsors, small PE teams, and the lenders and advisors helping them test the deal.
Model selection
Different Deals Require Different Underwriting
A $750,000 owner-operated acquisition should not be evaluated the same way as an SBA-financed $3 million transaction—or a $15 million lower-middle-market company. ADE adapts its underwriting framework to the acquisition being evaluated.
Main Street
Owner-operated acquisitions where personal operating reality and usable cash flow shape the deal.
- Owner/operator economics
- SDE and cash-flow support
- Owner dependence
- Buyer/operator fit
- Seller financing
- Transition risk
- Customer concentration
- Purchase-price support
SBA 8.1
SBA-financed acquisitions where eligibility, supportability, buyer requirements, and proof converge.
- SBA acquisition eligibility
- SBA financeability
- Debt-service coverage
- Required buyer equity and liquidity
- Uses of proceeds
- Business valuation support
- Buyer and management assumptions
- Evidence and documentation gaps
Lower Middle Market
Larger acquisitions where institutional readiness and the full capital stack change the analysis.
- Management depth
- Normalized EBITDA
- Enterprise valuation
- Capital structure
- Working-capital requirements
- CapEx burden
- Transferability
- Concentration and institutional acquisition risk
Same acquisition discipline. Different underwriting logic.
Business quality and deal quality
The Business Is Only Half the Question
Liking the company is not the same as proving the acquisition. A buyer still has to establish that the price, structure, transfer, and risk make sense for this buyer.
Good acquisition
The transaction earns the risk.
- Defensible cash flow supports the purchase price.
- The financing leaves room for operating reality.
- Ownership can transfer to the planned buyer or operator.
- The operating demands fit the buyer and the post-close plan.
- Evidence supports the assumptions carrying the conclusion.
A buyer needs both. ADE examines the acquisition without losing sight of the quality of the business itself.
The acquisition screen
What ADE Pressure-Tests
ADE organizes the first-pass screen around four connected questions: whether the economics work, whether the structure holds, whether the acquisition can transfer to this buyer, and whether the available proof supports the conclusion.
Economics
Whether the transaction rests on cash flow the buyer can actually use.
Cash flow
Tests usable cash flow after buyer compensation, recurring reserves, and operating reality.
Purchase price
Reads price in the context of defensible earnings, structure, and accepted risk.
Add-backs
Separates supported adjustments from items that still require verification.
CapEx
Accounts for recurring reinvestment before cash is truly available to the buyer.
Working capital
Surfaces cash required at close and ongoing operating pressure after closing.
Financing and Structure
Whether the proposed obligations and capital stack hold together.
Debt service
Tests scheduled obligations against the transaction's cash-flow capacity.
Capital structure
Examines how debt, equity, seller financing, rollover, or earnout shape the transaction.
Financeability
Separates business supportability from the terms a lender may be willing to consider.
Acquisition Risk
Whether the business can transfer and perform for this buyer after closing.
Owner dependence
Surfaces revenue, relationships, decisions, and operating knowledge that may leave with the seller.
Customer concentration
Tests exposure to the loss or repricing of a small number of customers.
Transferability
Examines whether relationships, processes, contracts, and control can transfer without breaking the thesis.
Buyer/operator fit
Compares the post-close operating plan with what the company actually needs.
Proof
Whether the available support justifies the inputs carrying the conclusion.
Evidence quality
Distinguishes documented inputs from estimates, unconfirmed claims, and seller explanations.
Unsupported assumptions
Identifies claims doing important work without adequate support in the current record.
Missing information
Names gaps that should cap conviction, change the structure, or trigger follow-up work.
ADE does not publish proprietary weights, formulas, or calibration thresholds.
Numbers are not evidence.
Analysis Confidence vs. Evidence Confidence
A number entered into a deal model is still an input. The buyer needs to know whether ADE can reason through the deal with the available information—and how strongly the available documents and support justify those inputs.
Analysis Confidence
Can ADE reason through the deal with the available information?
Analysis Confidence asks whether the screen has enough structured inputs to evaluate the current deal presentation and support a reasoned conclusion.
Evidence Confidence
How strongly do the available documents and support justify the inputs?
Evidence Confidence reflects the support available to ADE. It is not a representation that ADE has independently verified the underlying facts.
The two can diverge. A well-supported analysis can reach a negative conclusion. Attractive numbers may still deserve low confidence when the underlying claims are unsupported.
Financeability and buyer judgment
Financeable Does Not Mean Attractive
A lender can be willing to finance an acquisition that still offers a poor risk/reward proposition for the buyer. ADE keeps transaction supportability, proposed financing, and buyer attractiveness distinct.
Can the business support the transaction?
Test cash flow against compensation, reinvestment, reserves, and the obligations created by the purchase.
Can the proposed structure be financed?
Examine the debt burden, equity, terms, and requirements that shape financeability.
Does this acquisition make sense for this buyer?
Read the economics alongside buyer fit, operating demands, concentration, and transfer risk.
SBA 8.1 framework
For SBA-financed acquisitions, ADE applies its SBA 8.1 underwriting framework to examine financeability, debt-service capacity, transaction structure, buyer requirements, valuation support, and evidence gaps.
LMM framework
For lower-middle-market acquisitions, ADE shifts to an LMM framework built around EBITDA, management depth, capital structure, working capital, CapEx, transferability, and institutional acquisition risk.
ADE does not approve credit and does not replace lender underwriting. It gives the buyer a structured way to examine the acquisition before and alongside lender and advisor work.
Before the LOI
The Cheapest Time to Challenge a Deal Is Before Commitment Hardens.
As diligence costs, lender work, legal fees, travel, attention, and emotion accumulate, weak assumptions become harder to abandon. ADE creates a disciplined challenge point while walking away or changing course is still comparatively cheap.
- 01
Challenge the presentation.
Test the listing, teaser, CIM, and buyer assumptions while the deal is still easy to question.
- 02
Identify what must be true.
Make the acquisition thesis explicit before time and momentum turn assumptions into accepted facts.
- 03
Expose what has not been proven.
Separate documented support from estimates, unknowns, and claims that still depend on the seller's explanation.
- 04
Make the deal earn the next step.
Commit lender time, legal fees, diligence expense, and emotional energy only after the acquisition survives the first screen.
ADE does not replace due diligence or make the acquisition decision for the buyer. It helps the buyer decide whether the deal deserves the next step.
Buyer discipline before commitment
See What the Deal Is Really Telling You.
From Main Street and SBA-financed acquisitions to lower-middle-market transactions, ADE helps buyers pressure-test the acquisition before time, money, and emotion start making the decision for them.
Start with 3 free deal screens. No credit card required.