The Van Horne Screen
Factual definition
The Van Horne Screen is the ten-criteria test coined by Shayne Fitz-Coy in 2025, adapted from James C. Van Horne, for whether a business can carry leveraged buyout (LBO) debt: stable cash flows, low capex, a branded or identifiable product, an established position, low cyclicality, asset backing, low leverage at entry, no dependence on particular people, low research and development (R&D) intensity, and earnings before interest, taxes, depreciation and amortization (EBITDA) that converts to cash. A business rarely passes all ten, and which ones it fails decides the answer.
The Van Horne Screen in practice
A tea-shop chain passes the easy ones, with low capex and no research spending. It fails on cash flow stability, market position, brand and owned assets.
The easy criteria are easy for almost everyone. The hard ones are what the screen is for.
| Criterion | What it asks |
|---|---|
| 1Stable cash flows | Does the cash arrive predictably enough to schedule debt against it? |
| 2Low capex | Can spending be deferred in a bad year without breaking the business? |
| 3Branded or identifiable | Is there something customers ask for by name? |
| 4Established position | Is the market position defended rather than still being won? |
| 5Low cyclicality | Does demand hold through a downturn? |
| 6Asset-backed | Is there collateral a lender can take? |
| 7Low leverage at entry | Is the balance sheet clean enough to add debt to? |
| 8Not people-dependent | Does the business survive the founder leaving? |
| 9Low R&D intensity | Can development slow without the product falling behind? |
| 10EBITDA-to-cash conversion | Does reported profit actually turn into cash? |
Shayne Fitz-Coy’s definition of The Van Horne Screen
Business quality and debt suitability are two different questions. This screen asks the second one.
The Compounder Screen asks whether a business is attractive to own for a long time. The Van Horne Screen asks a different question: can this business carry the debt required by an LBO?
How Shayne Fitz-Coy uses The Van Horne Screen
Every criterion on the list asks the same question from the lender’s side. A yes is good for the lender, and a business that is good for lenders is a business you can put debt on.
So read it as a debt-capacity count rather than a quality score. The number of yeses tells you how much leverage the business will carry, and that is what decides whether an LBO is possible at all.
Why Shayne Fitz-Coy’s perspective on The Van Horne Screen matters
A good business is not always a good LBO candidate.
Shayne Fitz-Coy teaches the Van Horne Screen because leverage can turn a solid company into a fragile one if the buyer mistakes quality for debt capacity.
He mirrors Van Horne’s Socratic teaching style in his own classroom, working students through questions rather than handing them conclusions. The screen carries the method as much as the criteria.
Where this comes from
James C. Van Horne was the A. P. Giannini Professor of Banking and Finance at Stanford Graduate School of Business. He died on 1 September 2025, aged 90.
The introduction came from Professor H. Irving Grousbeck, when a financing question needed a second opinion. Fitz-Coy and Van Horne met in 2014, and the friendship ran until Van Horne’s death.
Those conversations ran through live deals, acquisitions, markets and politics. Van Horne would set assignments that looked a great deal like the ones he had given students for forty years.
The screen is named for those conversations. There is no published Van Horne LBO checklist to cite, which is why it is set out here in full.
Terms Related to The Van Horne Screen
LBO · The Compounder Screen · Leverage · Interest coverage · Debt/EBITDA multiple · All of the glossary