Falcon’s Solution Stories cast a spotlight on private equity-backed operators and the tools and tactics they leverage to create real value. In each entry, a world-class executive details a practical solution to a critical business issue. To be featured, contact us with the subject line “Solution“.

Executive: SaaS CFO with multiple private equity-backed exits.

Challenge: Managing near- and medium-term liquidity under a sponsor focused on investment and inorganic growth activity.

Solution: A weekly cash report completed by the controller team to strengthen cash flow forecasting and make liquidity a consistent touchpoint topic.

Growing both revenue and EBITDA is part of creating value in a PE-backed company.

EBITDA has long been viewed as a good indicator of cash flow in a business. However, EBITDA has become so littered with adjustments in many portfolio companies that it may no longer be an accurate surrogate for cash. 

EBITDA adjustments are typically born from one of two things. One, standing the business up – the sponsor bought a company and needs to put the right people, processes and systems in place to deliver on the investment strategy. Those activities lead to items that would be considered one time or unique in nature.

Two, the investment thesis often requires multiple acquisitions to execute on the plans for growth. The activities associated with inorganic growth activity consume cash but are not included in adjusted EBITDA. All of the expenses associated with an a...