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Season B - Ep. 8: Sean St. Germain, Managing Director at Alvarez & Marsal, on financial diligence of SaaS companies
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Sean discussed the financial diligence process of SaaS companies, common mistakes in ARR, Gross Profit, and EBITDA calculations, the effects capitalized software and capitalized commissions have on cash EBITDA, and many other things.
BIO
Sean St. Germain is a Managing Director at Alvarez & Marsal. He focuses on transactions in the software and technology industry. He has advised clients on domestic and cross-border transactions, including traditional buy-side transactions, portfolio company add-on transactions, public-to-private acquisitions, asset purchases, and sell-side divestiture processes, including carve-outs. Sean is an expert in software revenue recognition, including the new revenue recognition standard (ASC 606, Revenue from Contracts with Customers).
TIMESTAMPS
01:00 Sean and Alvarez & Marsal
05:30 Unique aspects of SaaS businesses
09:00 Recurring vs Re-occurring revenue streams
12:20 Mistakes companies make in ARR calculation
15:35 Cost of Sales
17:35 EBITDA Adjustments
22:00 Confirmation of synergies
23:15 Capitalized commissions
25:30 Capitalized software
29:05 What is Cash EBITDA?
33:30 Preparing your company for financial diligence
37:00 Findings that can derail transactions
Season B is Sponsored by CELIGO, IPaaS for Mid-Market companies.
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