AI Deal Analysis

You are analyzing a CIM (confidential information memorandum) for a small-business acquisition. A CIM is a sales document: your job is to read it against evidence, not to summarize its enthusiasm.

Work through the eleven claims below, one at a time. For each claim:
- State what the CIM asserts, with the page or section if identifiable.
- State whether the CIM itself contains the proof document or only the assertion.
- Run the analysis described, showing your arithmetic where numbers exist.
- Say plainly whether the red flag is present, absent, or unknowable from the CIM alone.

Never treat an assertion as verified because it is specific or confident. If the CIM does not contain the underlying document, the claim is UNVERIFIED, whatever the prose says.

THE ELEVEN CLAIMS

1. Revenue and its growth trend
   Proof document: Business tax returns and monthly P&L for three years
   Analysis: Tax-return revenue vs CIM revenue by year with every gap explained in writing
   Red flag: CIM revenue meaningfully above what the returns support

2. Adjusted earnings or SDE
   Proof document: The add-back schedule with backup for every line
   Analysis: Rebuild SDE yourself from the tax return up and price only your own number
   Red flag: Add-backs above a third of claimed SDE or one-time items that recur yearly

3. Recurring or contracted revenue share
   Proof document: Customer contracts and billing history by account
   Analysis: Count only auto-renewing revenue with real switching costs as recurring
   Red flag: Month-to-month arrangements presented as contracts

4. Customer concentration
   Proof document: Revenue by customer for three years
   Analysis: Top-one and top-five shares by year and the trend of each
   Red flag: Any customer above 20% or a top-five share climbing toward half

5. Margin story
   Proof document: Monthly P&L and payroll register
   Analysis: Gross and net margin by month against the industry's published range
   Red flag: Margins far above the trade's published range with no structural reason

6. Growth opportunities the buyer can unlock
   Proof document: None; this is the pitch section
   Analysis: Cost each idea and ask why the current owner has not done it
   Red flag: Growth math that requires the buyer to be better at the owner's own trade

7. Equipment and asset condition
   Proof document: Depreciation schedule and maintenance records
   Analysis: Age the fleet from the schedule and price the replacements due in three years
   Red flag: A tired asset list priced as if it were new

8. Workforce stability
   Proof document: Employee census and payroll register
   Analysis: Tenure distribution and pay against local market rates
   Red flag: Key-person dependence or below-market pay that transfers as turnover risk

9. Owner's role
   Proof document: Organization chart and the owner's own calendar description
   Analysis: List every function that is the owner today and who does it after close
   Red flag: A seller who is the head technician and the whole sales force at once

10. Lease and location
   Proof document: The premises lease with amendments
   Analysis: Term remaining and assignment terms against your loan's amortization
   Red flag: A lease shorter than the loan with no assignment right or renewal option

11. The asking price
   Proof document: Everything above
   Analysis: Your rebuilt SDE times the trade's cited band against the ask, and debt service coverage at your structure
   Red flag: A price the trade's own numbers cannot finance

AFTER THE ELEVEN

1. List every claim that came back UNVERIFIED, as a numbered document request list the buyer can send.
2. State the three most decision-relevant findings, each in one sentence with its number.
3. Give no overall recommendation. The buyer prices the deal; you read the document.

Here is the CIM text:

[PASTE THE CIM TEXT BELOW THIS LINE]

You are analyzing a small business as an acquisition target from its own numbers and facts. Work only from what is provided; where an input is missing, mark the dimension INPUT MISSING and say exactly which document would supply it.

Work through the eight dimensions below, one at a time. For each:
- Show the computation with the arithmetic visible.
- Apply the judgment rule and state the finding in one sentence.
- Rate the dimension GREEN, YELLOW, or RED, and say what single fact would change the rating.

Rules:
- Never average away a bad year; explain it or count it.
- Never accept a claimed adjusted-earnings figure; use only what you rebuilt in dimension one.
- Where the reader supplied their trade's published range or band, use it; where they did not, mark the comparison INPUT MISSING rather than inventing industry figures.

THE EIGHT DIMENSIONS

1. Earnings quality
   Inputs: Three years of P&L and business tax returns, the add-back list
   Compute: Rebuild SDE from the tax return up for each year; state the spread between claimed and rebuilt
   Judgment rule: Trust the trend of your rebuilt number only; a widening claimed-vs-rebuilt gap is the finding

2. Revenue durability
   Inputs: Revenue by customer and by service line for three years
   Compute: Recurring share under real contracts, top-one and top-five concentration, cohort retention where visible
   Judgment rule: Revenue that survives an ownership change is the only revenue being bought

3. Margin position
   Inputs: Monthly P&L, payroll register, the trade's published margin range
   Compute: Gross and net margin by month against the industry range; payroll share of revenue against the trade's norm
   Judgment rule: Above-range margins need a structural reason or they are an add-back story in disguise

4. Owner dependence
   Inputs: Org chart, the owner's actual week, customer relationship map
   Compute: List every function that is the owner personally: sales, estimating, key relationships, licenses held
   Judgment rule: Each owner-held function is a salary the buyer pays or a risk the buyer runs; price both

5. Workforce
   Inputs: Employee census with tenure and pay, local market rates
   Compute: Tenure distribution, pay versus market by role, single points of failure
   Judgment rule: Below-market pay is deferred turnover; a key technician is key-person risk with a different title

6. Asset reality
   Inputs: Depreciation schedule, maintenance records, lease terms
   Compute: Age the fleet and equipment; sum replacements due within three years; lease term against loan term
   Judgment rule: Deferred capex is purchase price in disguise; a short lease under a long loan is a landlord option on your equity

7. Financeability
   Inputs: Rebuilt SDE, the ask, your structure, current rate assumptions
   Compute: Debt service coverage at the ask with your injection and terms; the price where coverage crosses 1.25
   Judgment rule: The maximum financeable price is a computed fact; everything above it is equity story

8. Price against the trade
   Inputs: Rebuilt SDE, the trade's cited multiple band
   Compute: Rebuilt SDE times the band's low and high against the ask
   Judgment rule: State the premium or discount to the band in dollars and demand the reason for any premium

AFTER THE EIGHT

1. List every INPUT MISSING item as a numbered request list.
2. State the maximum financeable price computed in dimension seven, and the band position from dimension eight, side by side.
3. Give no buy-or-pass recommendation. The buyer owns the decision; you own the arithmetic.

Here are the business's numbers and facts:

[PASTE THE FINANCIALS AND FACTS BELOW THIS LINE]