Season B - Ep. 8: Sean St. Germain, Managing Director at Alvarez & Marsal, on financial diligence of SaaS companies

SaaShimi

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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