The Situation
The company was preparing for a sell-side process. The new platform contracts read clearly as SaaS. The historical contracts didn’t — they bundled recurring data capture with software access in a way that left the revenue characterization ambiguous. On SaaS multiples vs. services multiples, the difference would be measured in real money.
A Big-4-adjacent firm was running the Q of E. ARR composition, EBITDA, and how recurring revenue got classified would drive the entire valuation conversation.
What CEI did
Wrote the ASC 606 position memo arguing platform access plus required data refresh as a single bundled performance obligation, recognized ratably over the contract term. Anchored the argument in ASC 606-10-25-19 through 25-21.
Built the technical case: data capture has no standalone customer utility outside the platform, no usable deliverable exists outside the system, and contracts contractually require periodic refresh — making it indistinguishable from a SaaS commitment in substance.
Reclassified all historical contract revenue in the adjusted model on substance-over-form grounds. Only true one-off, optional professional services remained classified as project revenue.
Defended each adjustment with the buyer’s ASC 606 specialists through three rounds of diligence questions and one round of report revisions. Pre-built the technical objections and the responses to each.
100%
Recurring Revenue Classified as SaaS
Zero
Adjustments rejected in Diligence
Clean
Revenue Quality Outcome
The Q of E presented the business as a SaaS platform company with embedded recurring services — not a project-driven consultancy. ARR ran clean to the full recurring revenue base. The buyer’s accountants pressure-tested the position and accepted it without forcing a downgrade in revenue classification.
In Their Words
“Anyone can argue a number. CEI built the technical case, wrote it down, and stood behind it when the buyer’s accountants pushed back. That is the difference between a clean diligence and a discount.”
— CEO | Confidential Client