Wednesday afternoon’s “Valuation and Finance” session at this year’s Parallels Summit was hosted by straight talking DH Capital managing director Paul Stapleton covered the often complex business world that is more in the realm of bankers than hosters.
One of the major topics Stapleton covered was the difference between the following confusing acronyms: Generally Accepted Accounting Principles (GAAP) and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), which is more open to interpretation – that is a proxy for free cash flow.
While some companies valuate EBITDA using the last 12 months of performance, DH Capital uses the last quarter annualized, as well as looking at the company’s earnings on a fully diluted bases – meaning that it takes into account stock options and other value.
Stapleton also noted, under the light of his “Wall Street is Broken” PowerPoint slide, that the general atmosphere of mergers and acquisitions can be divided into the boom period before September 2008 and the post-apocalyptic thereafter.
“At the end of the day, all finance is based on confidence…so it stinks out there,” he said. He did note, however, that incumbents, fully-funded ventures and companies that provide products or services to reduce operating costs will weather the storm.
