I have a confession to make. Having served as a private equity portfolio CFO for several different PE firms in the past, and now as a search professional specializing in placing CFOs with PE-backed companies, I\u2019m a big fan of private equity. Article of the US member of InterSearch Worldwide, Charles Aris. I have a confession to make. Having served as a […]<\/p>","protected":false},"author":1,"featured_media":1542,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[31],"tags":[],"class_list":["post-1541","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-services"],"_links":{"self":[{"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/posts\/1541","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/comments?post=1541"}],"version-history":[{"count":1,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/posts\/1541\/revisions"}],"predecessor-version":[{"id":1543,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/posts\/1541\/revisions\/1543"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/media\/1542"}],"wp:attachment":[{"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/media?parent=1541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/categories?post=1541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/intersearch.us\/es\/wp-json\/wp\/v2\/tags?post=1541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
I love the people, the pace and the unlimited variety of companies that PE firms invest in. I especially love the CFO position within a PE portfolio company and think it\u2019s one of the most important and toughest jobs in business.
When I speak with CFOs who have never been in a portfolio, they always want to know what it\u2019s like. Here\u2019s what I tell them:
You get no extra credit for having a world-class financial background.<\/strong>
It\u2019s expected. It\u2019s the ticket to the game. You\u2019ll create, grow, improve, manage and run a world-class finance and accounting department. You\u2019ll close your books in single-digit days; financial statements will be accurate and timely. You\u2019ll collect cash promptly; everyone will be paid when expected and the banks will be happy. Audits will be completed on time with no adjustments. Everything ticks and everything ties, and that is the expectation.
You have two important and demanding bosses.<\/strong>
A major tripwire for CFOs working in a PE portfolio for the first time is the challenge of understanding and navigating the reporting relationship with their CEOs and private equity partners.
You\u2019ll report directly to the CEO of your company who will expect your undying loyalty \u2013 as that executive should. Having said that, the reporting relationship to the private equity firm isn\u2019t dotted; it\u2019s as solid as the solid line to your CEO. As CFO, you\u2019re the financial steward of the PE firm\u2019s investment, and the firm\u2019s leaders will look to you to keep them up to date about anything that could put their investment at risk.
Issues will develop, and you must be selective about which issues you share with your PE partner. Knowing what and when and how isn\u2019t always easy, but it\u2019s essential. Acknowledging this unique reporting relationship, and the skill to deftly navigate it, is key to being a trusted PE portfolio CFO.
There will be an exit, and you may lose your job.<\/strong>
It\u2019s no surprise that when people are asked about their biggest job-related fear, one of the common responses is that their company will be sold. As a PE portfolio CFO, it\u2019s your job to make sure there\u2019s an exit and ownership of the company is transitioned.
Whether it\u2019s sold to a strategic buyer, to another PE firm or taken public, it\u2019s your duty to ensure that those two objectives happen and to maximize the results. Your risk profile needs to include the very real probability that you\u2019ll do everything right, perform at the highest level, succeed in everything you do and, as a result, lose your job. It comes with the territory, but it also comes with a liquidity event. More on that below.
You\u2019ll be a strategic partner to your CEO and leadership team.<\/strong>
This isn\u2019t a chief accountant type of position in a PE portfolio. All the blocking-and-tackling finance and accounting must be complete, accurate and timely, but the true value you\u2019ll bring is being a strategic business partner to the company.
You\u2019ll be the CEO\u2019s right hand, advising, directing and challenging them to drive the portfolio\u2019s growth. I recently heard someone say that CFO is the only position, except for CEO, with a complete view of every function and aspect of a company. This is especially important in a PE portfolio, where your reach touches every department, person and decision in the organization. The best portfolio CFOs understand the business and help make history, not just record it.
It\u2019s a fast-paced life.<\/strong>
When we begin a new search for a CFO, I always ask the PE firm\u2019s leaders when they plan to exit the investment. The most common answer is three to five years. Some firms hold an investment longer, some shorter, but most fall into this range.
It\u2019s important to understand just how short 3-5 years really is, and how much needs to be done in such a short period of time. Minimally, the company will need to double or triple in size in conjunction with a significant increase in EBITDA. There will be a new ERP system for you to select and implement. There will be bolt-on acquisitions to evaluate and close. There will be staff to hire and bring up to speed. There will be lenders to manage and debt to reduce. There will be an exit to prepare for and successfully complete \u2013 all in 3-5 years.
It sounds daunting, and it is. It\u2019s also exciting. A strong PE firm can be nimble in its decisions, bypassing clunky bureaucracy and using strict discipline to ensure its fast-paced decisions yield good results. There\u2019s no time to sit still, and it\u2019s one of the best aspects of working in PE portfolios.
There will be an exit, and you\u2019ll participate in a wealth event.<\/strong>
You\u2019ll come in, and you\u2019ll work hard. You\u2019ll navigate challenging relationships dealing with multiple hard-charging, Type-A personalities. You\u2019ll take a great\/good\/challenged business and grow\/improve\/remake it, creating true value for the company\u2019s employees, its customers, suppliers, owners and investors \u2013 including you.
You\u2019ll think like an owner because you are an owner. It may be the first time in your career that you\u2019ve had this type of opportunity, or the most recent in a string of successful exits, but it\u2019ll be rewarding. Your successes may have put you on the street, looking for your next job, but another portfolio opportunity will be out there for you, and you\u2019ll be going after it with money in the bank.
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