Financial screening for deal teams
A first-pass financial screen should identify the next diligence questions, not turn incomplete records into definitive conclusions.
Start with a decision, not a verdict
A pre-QoE screen helps a deal team decide whether a target merits deeper financial diligence. Its purpose is to organize available evidence, identify questions, and make information gaps explicit. It is not an audit, review, or CPA assurance engagement.
Begin by recording the target, analysis period, source files, and the business question. A screen built from a partial ledger should not imply that all bank activity, contractual exposure, or customer relationships have been examined.
Establish the evidence boundary
Addback applies ten checks: EBITDA and addback candidates, revenue quality, customer concentration, working capital, cash proof, margin analysis, anomalies, related-party exposure, change-of-control exposure, and data completeness.
These checks depend on the evidence supplied. Structured spreadsheets and accounting exports support financial calculations. Bank and contract screening may draw on supporting document text. A missing source limits what can be assessed.
A candidate adjustment is a request for review. An unusual expense may be non-recurring, normal for the business, or simply described poorly in the ledger. The reviewer must establish the context before accepting an EBITDA adjustment.
Keep each material finding connected to its source file and row. Where a document supports the analysis, retain enough location information for a reviewer to find the relevant passage. A summary without a reviewable source is not a substitute for evidence.
Unknown and zero are different states. If a check lacks sufficient support, mark it not assessable and explain which record would resolve the gap. Do not substitute an estimate merely to produce a complete-looking report.
Review earnings, cash, and working capital together. A positive earnings trend can coexist with weak collections, unusual accruals, or a changing working capital requirement. Screening is a way to identify those relationships for follow-up.
Record the next action alongside the finding: request a reconciliation, obtain missing statements, discuss an adjustment with management, or expand the analysis period. Useful screening produces a focused diligence agenda.
Separate candidates from conclusions
