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

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. BIOSean 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).TIMESTAMPS01:00 Sean and Alvarez & Marsal05:30 Unique aspects of SaaS businesses09:00 Recurring vs Re-occurring revenue streams12:20 Mistakes companies make in ARR calculation15:35 Cost of Sales17:35 EBITDA Adjustments 22:00 Confirmation of synergies 23:15 Capitalized commissions25:30 Capitalized software29:05 What is Cash EBITDA?33:30 Preparing your company for financial diligence 37:00 Findings that can derail transactionsSeason B is Sponsored by CELIGO, IPaaS for Mid-Market companies.SIGN UP at https://www.saashimi.cloud to receive transcripts of the interviews and news about upcoming guests and events.