--- name: acquisition-risk-identifier description: "Produces a systematic pre-LOI acquisition risk assessment across six dimensions — commercial, financial, operational, regulatory, people, and integration — with each risk scored by likelihood and impact, flagged as a potential deal-breaker or manageable issue, and paired with a mitigation or diligence action. Use when screening an acquisition target before a Letter of Intent, pressure-testing a deal thesis, or building a risk register for a deal committee or investment memo." argument-hint: "[target-profile] [deal-structure]" allowed-tools: ["Read"] --- # Acquisition Risk Identifier ## Purpose Surface and categorize the risks in a proposed acquisition before committing to an LOI — scoring each by likelihood and impact, separating deal-breakers from manageable issues, and attaching a specific mitigation or diligence action so the deal team enters negotiation knowing exactly what to probe and where the walk-away lines are. ## When to Use Invoke this skill when the user asks to: - Screen an acquisition target before signing an LOI or term sheet - Build a risk register for a deal committee, board, or investment memo - Pressure-test a deal thesis for blind spots before deeper diligence - Identify what to prioritize in confirmatory due diligence - Assess whether a target's red flags are deal-breakers or negotiable - Compare risk profiles across competing acquisition targets ## Inputs Required Before starting, collect: - **Target overview**: What the company does, industry, size (revenue/EBITDA/headcount), geography - **Deal rationale**: Why this acquisition — strategic, financial, or talent-driven thesis - **Proposed structure**: Asset vs. stock purchase, valuation/multiple, cash vs. stock vs. earnout - **What's known so far**: Financial summary, customer concentration, key contracts, management situation — whatever has been gathered pre-LOI - **Acquirer context**: Buyer's size, sector, integration experience, prior deal track record - **Known concerns**: Any red flags the team has already spotted - **Regulatory environment**: Industry-specific regulation, antitrust sensitivity, cross-border considerations If financial detail or regulatory context is thin, flag the gap explicitly as a diligence priority rather than assuming a clean profile. ## Instructions ### Step 1: Establish Risk Scoring Conventions Apply a consistent scale to every risk identified in the dimensions below. - **Likelihood**: Low / Medium / High — probability the risk materializes given what's known - **Impact**: Low / Medium / High — severity to deal value or post-close performance if it does - **Classification**: Deal-Breaker (could justify walking away or repricing materially) / Material (needs mitigation or structural protection) / Monitor (manageable, track in diligence) - A risk is a **Deal-Breaker** only when High impact combines with Medium+ likelihood and no viable mitigation exists. Be disciplined — over-flagging deal-breakers erodes credibility with the committee. ### Step 2: Assess Commercial Risk Demand-side and market durability of the thesis. - **Customer concentration**: Top customer / top 5 / top 10 as % of revenue — flag if top customer >15% or top 5 >40% - **Revenue quality**: Recurring vs. one-time, contracted vs. at-will, churn and renewal rates - **Market trajectory**: Is the target's category growing, flat, or declining? - **Competitive position**: Defensibility, pricing power, substitution threat - **Change-of-control exposure**: Contracts or customers that can exit on acquisition - **Synergy realism**: Whether revenue synergies in the thesis are plausible or optimistic ### Step 3: Assess Financial Risk Quality and durability of the earnings being purchased. - **Earnings quality**: One-time items, owner add-backs, aggressive revenue recognition inflating EBITDA - **Working capital**: Normalized level vs. peg, seasonality, hidden cash burn - **Debt and off-balance-sheet items**: Leverage, leases, contingent liabilities, deferred revenue - **Margin sustainability**: Whether current margins hold post-close or rely on under-investment - **Valuation pressure**: Whether the multiple assumes synergies or growth that carry execution risk - **Tax exposure**: Structure-driven tax leakage, prior positions, nexus issues ### Step 4: Assess Operational Risk Whether the business runs without the seller and current owners. - **Key-person dependence**: Founder/owner-operator concentration in sales, IP, or relationships - **Systems and infrastructure**: Tech debt, manual processes, scalability ceilings - **Supply chain and vendors**: Single-source dependencies, concentration, contract terms - **Asset condition**: CapEx backlog, deferred maintenance, asset obsolescence - **Scalability**: Whether the operating model supports the growth in the thesis ### Step 5: Assess Regulatory & Legal Risk Approvals, compliance, and litigation that gate or threaten the deal. - **Antitrust / merger control**: Market share overlap, filing thresholds, approval timeline - **Industry licensing**: Permits, certifications, or registrations that may not transfer cleanly - **Compliance history**: Investigations, consent decrees, environmental or data-privacy exposure - **Litigation**: Pending or threatened claims, IP disputes, employment matters - **Cross-border**: Foreign investment review (e.g., CFIUS-type regimes), data localization, sanctions ### Step 6: Assess People & Culture Risk Whether the talent and organization survive the transaction. - **Retention risk**: Key employees without retention packages or with weak non-competes - **Cultural fit**: Operating-style mismatch between acquirer and target likely to drive attrition - **Compensation gaps**: Misaligned pay, equity, or benefits requiring costly harmonization - **Leadership transition**: Whether the seller stays, and what happens to the business if they leave - **Organizational structure**: Hidden under-staffing or over-reliance on contractors ### Step 7: Assess Integration Risk Execution risk of capturing the value the price assumes. - **Integration complexity**: Systems, processes, and brand consolidation effort - **Synergy capture timeline**: Whether cost synergies in the model are achievable in the assumed timeframe - **Day-1 readiness**: Carve-out / TSA dependencies if the target is being separated from a parent - **Acquirer capacity**: Whether the buyer has the integration muscle for a deal this size - **Cost-to-achieve**: One-time integration costs that erode the deal's net value ### Step 8: Build the Risk Register and Verdict Consolidate every identified risk into a single ranked register. 1. List each risk with its dimension, likelihood, impact, and classification 2. Pair each Deal-Breaker and Material risk with a specific mitigation or diligence action — what to verify, what structural protection to negotiate (escrow, earnout, indemnity, reps & warranties, holdback), or what to walk on 3. Rank the register by combined likelihood × impact within each classification tier 4. Deliver a verdict: **Proceed** / **Proceed with Conditions** / **Pause** / **Walk** — with the 2–3 risks driving the call ## Output Format - **Structure**: Six dimension sections, each listing scored risks; a consolidated ranked risk register table; a closing verdict - **Length**: 1,000–1,400 words - **Format**: Structured bullets per dimension; risk register as a table (Risk | Dimension | Likelihood | Impact | Classification | Mitigation/Action) - **Sections**: Commercial → Financial → Operational → Regulatory & Legal → People & Culture → Integration → Consolidated Risk Register → Verdict - **Tone**: Corporate development director — disciplined, skeptical, decision-oriented; flags what's unknown rather than assuming it's fine ## Quality Checklist Before delivering output, verify: - [ ] All six risk dimensions are assessed — none skipped even if low-risk - [ ] Every risk in the register carries a likelihood, impact, and classification - [ ] Each Deal-Breaker and Material risk has a specific mitigation, structural protection, or diligence action — not a generic "investigate further" - [ ] Deal-Breakers are reserved for High-impact, viable-mitigation-absent risks — not over-flagged - [ ] Information gaps are named as diligence priorities rather than assumed clean - [ ] A clear verdict is delivered with the 2–3 driving risks identified ## Notes - Pre-LOI screening rewards finding the deal-breaker early — the cheapest "no" is the one made before legal and diligence spend begins - Customer concentration and key-person dependence are the two most commonly underweighted risks in founder-led targets; probe both even when the financials look clean - Tie mitigations to deal mechanics where possible — an earnout addresses synergy-realism risk, an escrow addresses litigation risk, retention packages address people risk — so the team can negotiate protections rather than just naming concerns - When comparing multiple targets, hold the scoring conventions constant so risk registers are directly comparable across deals --- ## How to use this skill This file is a Claude Code skill in [Anthropic's standard format](https://docs.anthropic.com/en/docs/claude-code/skills) — markdown with YAML frontmatter at the top. **Installing in Claude Code:** - `~/.claude/skills//SKILL.md` — auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects) - `/.claude/skills//SKILL.md` — auto-loads only when working in that project (recommended for project-specific skills) Restart Claude Code or open a new session to register. **Using in Claude.ai, ChatGPT, Gemini, or other AI tools:** 1. 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