A Diagnostic Scorecard for "Are We Overpaying"
Most overpayment gets caught by a model that was built to justify the price, not to question it. A scorecard, filled in by someone with nothing to gain from the deal closing, catches what the model won't.
Every acquisition price is defended by a DCF, a comparable-transactions analysis, and a synergy case. All three are built by people structurally incentivised for the deal to close — corporate development, whose year is measured in deals done; bankers, whose fee is contingent; the CEO, whose growth story needs the acquisition. None of that makes the number dishonest. It does mean the number is built by people leaning in one direction, and a board relying on that number alone is relying on a single, motivated source.
A scorecard is different from a valuation. It doesn't try to produce a price. It produces a set of plain yes/no and low/medium/high answers a board member with no modelling background can complete in twenty minutes — answers that flag when a deal is being carried by optimism rather than evidence.
Eight questions worth scoring on every deal
Is the synergy case built mainly on cost or mainly on revenue — and if revenue, has any comparable cross-sell assumption in this company's history actually been achieved on schedule? Where does the multiple being paid sit against genuinely comparable recent transactions, and who selected that comparable set? How much new operational load does this acquisition add — new systems, new product lines, new geographies, new regulatory regimes — relative to the acquirer's demonstrated capacity to absorb it, based on its last integration? Has anyone modelled the downside case with the same rigour as the base case, and does the downside case still clear the cost of capital? What's the retention risk on the people the value actually depends on — is there a binding mechanism, or only a hope? Is the timeline to breakeven based on the acquirer's own historical integration speed, or an assumed best case that has never actually been hit internally? Who loses their job or their political capital if this deal is killed, and does that person sit on the approval committee? What would a competent competitor, buying the same asset with no emotional stake in the outcome, be willing to pay — and how far above that is this offer?
Why this belongs in the boardroom, not just the deal team
A scorecard doesn't replace the valuation. It sits beside it as a second, independent signal, completed by someone outside the deal team — an independent director, an external advisor with no fee riding on completion, or a rotating "red team" role assigned specifically to argue against the deal. All the value of the exercise comes from its independence. A scorecard filled in by the same team that built the DCF will simply mirror the DCF's optimism.
Boards that adopt something like this as a standing requirement, not a one-off exercise for a single contested deal, tend to report fewer deals that need defending eighteen months later — because the weak ones get caught early, or at least get approved with eyes open rather than closed.