Add-On Acquisition Screening Scorecard

Executive summary

An add-on acquisition screening scorecard is a short, weighted list of criteria that a platform company uses to decide which small acquisitions deserve diligence time. Its job is not to find the best business in the market. Its job is to find the businesses this platform can buy at a sensible price, integrate with the team it has, and report on within its existing close process.

Two features separate a useful scorecard from a ritual one. The first is evidence rules: every score must point to a document, a data point, or a named conversation, so two people scoring the same target land close together. The second is knockout gates: a small number of criteria, such as earnings quality and integration complexity, can block a target regardless of its total. Without gates, a strong strategic fit and a good price can outvote a business whose earnings cannot be verified.

This guide gives the criteria, a scoring method, a worked example with three targets, and a process to connect the result to the platform's capacity to integrate. The scorecard is a screening tool. It does not replace financial, legal, tax, or operational diligence, and no score should be treated as a conclusion about a target's value or legal position. Involve counsel and your advisers before you sign a letter of intent.

When to use this

Use this guide when:

• A platform has a pipeline of possible add-ons from brokers, direct outreach, or owner introductions and needs a consistent way to rank them.
• Past add-ons were chosen mainly on price or relationship, and some of them integrated badly.
• A sponsor or board asks why one target moved to diligence and another did not.
• The team is stretched, and every diligence engagement has a real cost in time and fees.
• You want to turn what you learned in earlier integrations into criteria for the next one. The buy-and-build platform integration model explains the platform side of that.

Diagnostic questions

Answer these about your own platform first. They set the criteria and the weights.

1. Why did the platform buy its previous add-ons, and which of those reasons proved correct?
2. Which add-ons integrated well, and what did they have in common?
3. Which add-ons disappointed, and what could have been seen at the screening stage?
4. What is the maximum number of integrations the platform can run at once? See the integration model for how to set it.
5. Which functions does the platform do well enough to extend to a new unit, and which not?
6. What does the lender's agreement require for acquisitions, such as size limits, consent, or reporting?
7. What earnings quality problems have appeared in past targets, such as owner expenses, cash-basis books, or undocumented add-backs?
8. Does the target's customer base overlap with the platform, and is that a benefit or a risk?
9. Who in the target holds the key relationships, and what would they need to stay?
10. What does the platform's exit story need each add-on to show?
11. Who is the single named approver for moving a target from screening to a letter of intent?

If you cannot answer questions 2 and 3, review your last two or three add-ons before you design the scorecard. The best criteria usually come from what actually went wrong.

The framework: criteria, weights, and gates

Seven criteria

Weights

Weights express what matters most to this platform, and they must sum to 100. A starting set follows. Change them, and write down why.

A platform with weak integration capacity might raise the weight of integration complexity and systems readiness. A platform with a strong back office might lower them and raise fit. The point of writing the weights down before scoring any target is to avoid tuning them to favor a target someone already likes.

Scoring scale

Score each criterion from 1 to 5 using anchored descriptions.

Write a one-line anchor for each criterion at score 1, 3, and 5, based on your own history. For example, for systems readiness, a 5 might be "monthly close within 10 days on a standard chart of accounts", a 3 "monthly close but custom accounts", and a 1 "no monthly close". Your anchors may differ.

Weighted points for a criterion = weight × score ÷ 5. The total is out of 100.

Knockout gates

A gate blocks a target from moving to a letter of intent, whatever its total, until a named mitigation is approved. Suggested gates:

• Quality of earnings scored 2 or below. If earnings cannot be verified, the price is unsupported.
• Integration complexity scored 2 or below, unless the integration capacity check shows the platform can absorb it.
• Any lender or contract restriction that prohibits the deal or requires consent not yet in hand. This is a legal question; ask counsel.
• Key leader unwilling to stay where the business depends on that person.

Gates are the main reason to use a scorecard. Totals reward balanced profiles; gates protect against a single fatal flaw.

Worked example (illustrative)

The scores below are invented to show the method. They do not describe real companies or benchmarks.

A platform screens three targets with the starting weights.

Weighted points (weight × score ÷ 5):

Checks: Target A: 16 + 12 + 12 + 9 + 10 + 6 + 8 = 73. Target B: 12 + 20 + 9 + 12 + 4 + 8 + 6 = 71. Target C: 20 + 8 + 6 + 9 + 6 + 4 + 10 = 63. Each total also equals the sum of weight × score divided by 5 (365, 355, and 315, divided by 5).

How to read it:

• Target C has the best strategic fit and the best working capital, but scored 2 on quality of earnings and 2 on integration complexity. Both gates apply. Its total is the lowest, and even if it were the highest, it could not move forward without an approved mitigation, such as a quality of earnings review before any letter of intent.
• Targets A and B are two points apart. That difference is smaller than the noise in the scoring, so do not rank them by total. Compare their profiles instead. A is cheaper and easier to integrate with moderate earnings evidence; B has verified earnings and strong management but a high price.
• The decision is a capacity question. If the platform can run only one integration at the moment, the choice between A and B depends on which risk the team can handle: A's earnings uncertainty can be tested in diligence, while B's price cannot be changed by diligence.
• Scores are inputs to a conversation. The decision belongs to the named approver, with the reasons written down.

Step-by-step process

Templates

Screening scorecard (copy into a spreadsheet)

Formula for the weighted points column: weight × score ÷ 5.

Gate check

Screening data request (short form)

1. Monthly income statements and balance sheets for 36 months.
2. Top 20 customers by revenue with tenure and contract terms.
3. Systems inventory (ERP, CRM, payroll, key operations systems).
4. Org chart with tenure and ownership of key leaders.
5. List of known one-time items and owner expenses.
6. Outstanding debt, leases, and contingent obligations.

Metrics and KPIs

Targets by method. Set the scorer agreement goal from your first scoring round: the aim is to reduce the number of two-point disagreements in the next round. Use your own add-on history as the test of the scorecard: if a criterion you weight heavily did not predict outcomes, change the anchors or the weight at the next review. Do not borrow weights or pass marks from another platform.

Common mistakes

1. Letting totals override gates. A target with 80 points and unverifiable earnings is still unverifiable.
2. Tuning weights after seeing the targets. Set them first and record the reasoning.
3. Single scorer. One person's view reflects their relationship with the seller. Use two independent scorers and reconcile.
4. Scores without evidence. Each score needs a document or a named source. Otherwise, the scorecard records opinions.
5. Ranking close totals. Differences of a few points are noise. Compare profiles and risks.
6. Ignoring capacity. The best target is not the right one if the platform cannot integrate it this year.
7. Treating the scorecard as diligence. It screens. Financial, legal, tax, and operational diligence still follow. Counsel must review contracts, consents, and lender terms.
8. Never updating. If scores do not predict outcomes, the scorecard should change.

AI prompt assistance

AI can help organize evidence and check consistency. It should not score a target without your evidence, and it cannot assess a legal or lender restriction. Provide the data and verify every output.

1. Pre-fill evidence notes.

I will paste a target's customer list, three years of monthly revenue, and a systems inventory. For each of these criteria (strategic fit, earnings quality, integration complexity, systems readiness, working capital), list the facts in my data that bear on it, and the facts missing. Do not assign scores.

Check: confirm each fact against the source, and score yourself with a second scorer.

2. Check the arithmetic.

Here is my scorecard with weights and scores for three targets. Compute weighted points as weight × score ÷ 5 and totals, and list any target that scores 2 or below on a gate criterion.

Check: recompute one total by hand and confirm the weights sum to 100.

3. Draft diligence questions from open items.

Here are the open questions from the screening scorecard for one target. Group them by workstream (financial, commercial, operational, technology, people) and write the specific data request for each, in plain language for the seller.

Check: have the diligence lead remove duplicates and add anything required by your lender or counsel.

Implementation guide

Governance: the CEO owns the weights, the CFO owns the gates on earnings and price, the COO owns the capacity check, and the named approver signs the move to a letter of intent. Share the scorecard with the board once a quarter so criteria are not changed informally.

Downloadable assets

The screening scorecard, gate check, and data request above are designed to be copied into a spreadsheet; the weighted-points formula is stated beside the table. To size what a shortlisted target might add after integration, use the acquisition synergy calculator.

Related resources

• Due diligence hub: all diligence guides in one place.
• Buy-and-build platform integration model: how the platform absorbs each add-on.
• Financial due diligence checklist and quality of earnings report before you close: what follows a passed screen.
• Working capital peg in M&A: the price mechanics for the working capital criterion.
• Commercial due diligence red flags, technology due diligence for operators, and people and organization due diligence: sources for the fit, systems, and people scores.
• PMI playbook: Day 1 to Day 365 and synergy tracking model to realized EBITDA: what happens after the deal.

Frequently asked questions

What criteria should an add-on acquisition scorecard include?

An add-on scorecard should include strategic and customer fit, quality of earnings, integration complexity, management and people, price and structure, systems and data readiness, and working capital and cash. Weight them by what matters to your platform, write anchors for each score, and add knockout gates for earnings quality and integration complexity.

How do you weight add-on acquisition criteria?

Set weights before scoring any target, based on what went right and wrong in your own past add-ons, and make them sum to 100. A platform with weak back-office capacity may weight integration and systems readiness more heavily. Record the reasoning, and change weights only at scheduled reviews, not to favor a preferred target.

What is a knockout gate in acquisition screening?

A knockout gate is a rule that blocks a target from moving forward whatever its total score, until a named mitigation is approved. Common gates are low earnings quality, high integration complexity, an unresolved lender or contract restriction, and an unwilling key leader. Gates stop a strong total from hiding a fatal weakness.

How many targets should be scored before diligence?

Score every target that reaches a serious conversation, because scoring is cheap compared with diligence fees and management time. Use two independent scorers per target and reconcile gaps of two points or more. Spend diligence resources only on targets that pass the gates and fit the platform's integration capacity.

Can a scorecard replace due diligence?

No. A scorecard screens targets using evidence available early, and it should hand open questions to financial, commercial, operational, technology, and people diligence. Legal, tax, and lender questions need counsel and your advisers. A high score is a reason to spend diligence effort, not a conclusion about value.

How this works in a System of Performance

A scorecard improves only when its scores are compared with what happened after the deal. A Performis routine can take on a recurring job like this, with the scope and fit agreed with you: it works from the records your team supplies, prepares the work for your named reviewer, and keeps each approval on record. To see where your own platform's reporting and integration capacity stand today, bring it to us as a launch partner.