What is PE deal screening?

Deal screening is the early filter where investors decide whether a target deserves deeper diligence. You weigh growth quality, margins, leverage capacity, and risk before spending IC time.

Is this the same as a paper LBO?

No. A paper LBO tests return arithmetic. This challenge tests judgment under incomplete information and a mid-process shock.

Do I need an account?

No. Start immediately with no signup. Download a memo summary or continue into the free timed demo.

How is the score calculated?

You earn points for quality-score alignment, leverage fit, bid discipline, diligence prioritization, and an IC decision that responds to the risk event. Stretch bids with aggressive leverage are penalized when the shock hits.

What is a private equity case study interview?

It gives you a target, some financials, and limited time to recommend advance, reprice, or pass with reasoning. This drill runs the same loop with a mid-process shock added.

What should a screening memo actually contain?

A short thesis, the two or three risks that could break it, the diligence needed to test them, a bid range anchored to comparables, and the capital structure that survives a downside case.

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Judgment drill

Deal Screening Challenge

Walk an investment committee memo loop. Review a teaser, score quality, set capital structure, respond to a shock, and decide: advance, reprice, or pass.

Educational decision practice only. All targets are fictional. Not a recommendation on any real company or live transaction.

1Mode1
2Teaser2
3Quality3
4Structure4
5Shock5
6IC vote6

Pick a fictional teaser on the left. All companies are educational constructs.

Continue this deal in the simulator

The free desk ends here. The Super Simulator puts the same judgment into 20+ connected workspaces.

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Worked example: reprice rather than stretch

A fictional vertical software target, screened with round numbers. Figures are in millions.

EBITDA: 25
Seller ask: 11.0x
Comparable multiples: 10.0x
Leverage offered: 5.5x
FCF conversion: 60% of EBITDA
Shock: Top customer renewal at risk

1
Ask versus comps
25 x 11.0 = 275 versus 25 x 10.0 = 250, one turn of stretch
2
Debt at the ask
25 x 5.5 = 138 debt, equity 275 - 138 = 137
3
Cash available
25 x 60% = 15 per year before the shock
4
Shock case
EBITDA down 10% to 22.5, cash to 13.5, leverage rises to 6.1x
5
Decision
Reprice to 10.0x and 5.0x debt: equity 125, leverage 5.6x in the shock case

The asset stays interesting, the price does not. Repricing one turn and taking half a turn of leverage out keeps headroom through the shock, which is the answer the IC is testing for.

Method

Deal screening is where PE judgment starts. This drill compresses teaser review, quality scoring, capital structure choice, diligence prioritization, and an IC vote into one coherent loop.

Scoring rewards coherent underwriting: quality scores that track the teaser, leverage that fits cash flow quality, a bid that respects fair value, diligence asks that would change the vote, and an IC decision that matches the risk event.

1. Read the teaser for earnings quality
Separate recurring, high-conversion earnings from story growth before scoring anything.
2. Score quality and set leverage
Scale debt to cash flow predictability so a customer or payor shock still leaves headroom.
3. Set a bid that respects fair value
Anchor the bid to comparable multiples so the case does not depend on multiple expansion.
4. Prioritize diligence that could change the vote
Spend requests on the two or three questions that would actually flip the decision.
5. Vote after the shock
Advance, reprice, or pass based on the updated risk and return, not the original thesis.

Strong screeners separate quality of earnings from story quality. Recurring software with concentration risk is not the same as a cash-converting distributor with cyclical volume. Leverage should scale with predictability: sticky cash flows can support more debt, but only if you still have room when a customer or payor shock arrives. Bid posture is the second filter. Stretching entry multiples leaves little room for multiple compression later. When a shock hits mid-process, the IC call should update the underwriting, not defend the original thesis by default. Reprice when the asset remains interesting at a lower entry. Pass when the risk changes the risk-return shape too far. Use this drill to rehearse that judgment loop, then practice full lifecycle consequences in the Super Simulator.

FAQ

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