How do you approach deal evaluations?

April 17, 2025

by a searcher from Harvard University - Harvard Business School in Austin, TX, USA

I’ve found that being systematic about evaluating deals—using multiple tiers of evaluation—helps avoid snap judgments and keeps me grounded. Quick screen → deeper dive → context/fit check. It doesn’t need to be fancy, but having structure helps me stay consistent. How do you approach your own evaluations?

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Reply by a searcher
from Massachusetts Institute of Technology in Boston, MA, USA

Thank you for the tag A structured approach naturally tends to produce the most consistent outcomes. It helps teams ensure that time and attention are focused on the most promising opportunities. Pre-LOI: the evaluation is intentionally fast—typically within a day or two. The goal is not to validate every aspect of the deal but to assess whether it clears a reasonable threshold to warrant moving forward. This initial screen focuses on key criteria like licensing status, financial cleanliness, payer mix, industry attractiveness, owner involvement, and any obvious deal breakers. If it passes, the emphasis shifts quickly to submitting a compelling LOI. From that point, most of the effort is spent engaging the seller—whether that's through a meeting, site visit, or building rapport—and navigating any broker processes or competitive dynamics to secure LOI acceptance. Post-LOI: shifts into a more rigorous and staged diligence process. The first step is typically a self-check or review to validate the original thesis built over the pre-LOI timeframe. Following that, a full diligence workstream —covering QofE, legal, regulatory, insurance, and operational aspects, often supported by a detailed checklist and appropriate advisors. The overarching mindset throughout is to get to “no” as efficiently as possible. Deals that fail to meet expectations at any stage are filtered out. Note: if a deal presents only one major but manageable issue, we would let the process continue with efforts and/or thought process directed to how to best mitigate it. In contrast, the emergence of two or more significant concerns (even seemingly manageable) is a pass. An additional layer of discipline is “a check” of having a trusted confidant to “test out your thinking”. This can help surface blind spots, challenge assumptions, and improve overall decision quality. Probability that two competent and incisive minds have similar “bad thought process” on a topic is fairly low.

Reply by a searcher
from University of Notre Dame in Chicago, IL, USA

Thanks for the tag, Luke. I agree with David: disqualifying leads quickly helps maintain a manageable volume for me as a first-time searcher. How I've done this at the prospecting stage is to build a lightweight cash flow model for relevant projections using just a few deal-specific inputs (e.g., EBITDA, multiple, revenue growth, leverage) and my investment criteria. That way I can quickly see what financing options and potential IRR for my specific situation look like based on the business's core financials, disqualify anything that doesn't fit using data, and go deeper on the right opportunities.

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