Acquisition Criteria Framework
Strategic Thesis: Target CNS companies with defensible technology, established revenue streams, and clear bolt-on potential. Avoid binary biotech risk while maintaining innovation upside through operational leverage.
Financial Criteria
Anchor Targets (Control Positions)
- Revenue: $35-75M annually
- EBITDA: $7-15M (20%+ margin)
- Growth: 15%+ CAGR sustainable
- Cash flow positive or path within 12 months
- Working capital <45 days
- Gross margins: 60%+ for SaaS, 40%+ devices
- Customer concentration: No single >25%
Bolt-On Targets (Strategic Additions)
- Revenue: $5-25M annually
- EBITDA: Positive or breakeven
- Growth: 20%+ or synergy-driven
- Strategic fit: Technology/channel/data synergies
- Integration timeline: <18 months
- Synergy confidence: 70%+ of underwrite
- Management retention: 80%+ key talent
Operational Criteria
Technology & IP
- Defensible IP portfolio (patents, trade secrets)
- Regulatory approvals or clear pathway
- FDA/EMA interactions documented
- Clinical data supporting efficacy
- Competitive moat (technology, data, network)
- Scalable platform architecture
Market Position
- Established payer relationships
- Reimbursement codes secured or likely
- Key opinion leader endorsement
- Clinical validation studies published
- Distribution partnerships in place
- Brand recognition in target segments
Strategic Fit Assessment
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Valuation Framework
| Business Model | Revenue Multiple | EBITDA Multiple | Key Drivers | Risk Factors |
|---|---|---|---|---|
| SaaS Diagnostics | 4-8x | 15-25x | Recurring revenue, data moat | Reimbursement changes |
| Device + Software | 3-6x | 12-20x | Hardware margins, install base | Technology obsolescence |
| Specialty Pharma | 5-10x | 10-18x | Patent protection, margins | Regulatory risk |
| Platform/Network | 2-5x | 8-15x | Network effects, scalability | Provider adoption |
Deal Structure Framework
Anchors (Control)
Ownership Target51-80%
Management Rollover15-25%
Cash at Close70-85%
Earnout/Milestones15-30%
Bolt-Ons (Strategic)
Ownership Target80-100%
Management Rollover5-15%
Cash at Close60-75%
Synergy-Based Earnout25-40%
Red Flags - Automatic Pass:
- Single-product dependency with no pipeline
- Founder-dependent operations (no management team)
- Regulatory black box (no FDA interaction history)
- Customer concentration >50% in top 3 accounts
- Technology more than one generation behind leaders
- Negative gross margins or unclear unit economics
- Active litigation threatening core IP