Finding the Ideal Private Equity-Backed CFO for Your Business

Finding the Ideal Private Equity-Backed CFO for Your Business

Finding the Ideal Private Equity-Backed CFO for Your Business

What makes a PE-backed CFO different is their high turnover rate. Most of them remain in post for 18 months before moving on. Being a PE-backed CFO changes the context of the CFO role, posing its own challenges. These CFOs come under intense security within their company and by all stakeholders.

The changing world of work and evolution driven by the pandemic has led CFOs to take on an even more vital role within their companies. If your company is looking for or has PE-backing, you’ll want to find the right CFO who has the background and experience to work with private equity firms.

At FD Capital, many of our diverse portfolio of candidates have extensive experience working within private equity. Whether you’re a start-up or an SME, you want a CFO who is familiar with the nuances that private equity brings to the operations and finances of your business.

We’re sharing our insight into what makes the ideal candidate for a private equity-backed company. At FD Capital, we match businesses with the CFO who can hit the ground running and nurture their relationship with private equity firms.

Why PE Firms Want an Ideal Candidate:

When your company is backed by a private equity firm, you can expect them to play a role in the recruitment of your CFO. This leadership position is the individual who will act as a link between your business and the CFO.

If you’re seeking private equity funding, you can expect the firm to take an interest in who your current CFO is or who you intend to hire. The role of CFO in helping a business scale is why your PE firm will take an interest in the experience, knowledge, and skills of the candidate.

Most CFOs fall into one of three categories that reflect their experience and skills:

1. Operational CFO

An ‘operation CFO’ is one whose portfolio of responsibilities expands beyond just finance. They’ll be involved in everything, from recruitment to legal and overseeing the supply chain.

2. Financial CFO

The ‘financial CFO’ is one whose focus sits primarily on overseeing the function of financial systems and the business’ overall finances. They’ll implement the processes and systems that will help a PE-backed company evolve to the next stage of its business.

3. Strategic CFO

A ‘strategic CFO’ is the one most sought by private equities. This style of CFO acts as the link between the company and their PE firm. They play a strategic role within the c-suite leadership team.
You’ll rarely find a CFO candidate who ticks all three of these boxes entirely, but a private equity firm will want one who has experience within these three. The operational aspect of being a CFO is what PE-backed firms will focus on as they’ll want a candidate who can support decision making.

The Experience a PE-Backed CFO Needs

CFOWhile most CFOs at a PE-backed company will usually stay in post for 18 months, PE firms prefer a candidate who will stay with the company throughout its development and evolution.

The ideal candidate for a company with PE-backing has experience working at a portfolio company before. If a candidate doesn’t have experience at a portfolio company, it’s not an immediate reason to put their application in the rejection pile.

The ideal PE-backed CFO will embody strong leadership skills and be able to fulfil the strategic responsibilities of the role. What makes the role of CFO different at a PE-backed firm is that they’ll typically be responsible for future fundraising, managing growth, and creating an exit plan.

If the company decides that its plan to list on the stock market in the future, the CFO doesn’t necessarily need experience doing this before. The benefit of a PE-backed company is that their private equity firm will support during this transition if it offers.

Most PE firms will look for a candidate that already has experience within the company’s industry and niche. At FD Capital, our portfolio of candidates has a diverse range of industry expertise. We’ll work with you to find the CFO candidate that will tick all the boxes for your PE-backed company.

What Makes a Successful PE-Backed CFO?

When you’re recruiting a PE CFO, you want them to have several skills that they have a proven track record of delivering on. A candidate who has these skills will be able to hit the ground running and meet the expectations of the PE CFO role.

1. Leadership skills

As part of the c-suite team, a CFO takes on a leadership role within the company. You’ll want a candidate with strong leadership skills who can take ownership of the business’ strategy and motivate employees through the PE lifecycle.

2. Driven by results

The role of CFO is driven by a desire to see performance within a company. With a PE-backed company, there is an even stronger drive for success during the PE life cycle. You want a CFO who understands the urgency of delivering on results and has a track record of doing so.

3. Overseeing change

Companies with PE backing experience rapid growth as a dynamic organisation. A CFO will be expected to step up to the challenge of helping to oversee this rapid change through their strategic insight, evolving systems, and initiatives.

4. Strategic thinking

Strategy appears in every aspect of a PE-backed CFOs role. As part of the c-suite team, the CFO is expected to be a strategic partner to the CEO and the PE firm. They’ll be factoring in long-term strategy into their decision making to continue the evolution of the company through fundraising and M&A.

5. Interacting with stakeholders

Any CFO will be expected to interact with stakeholders across the board. Within a PE-backed company, this responsibility takes on a new importance as the CFO acts as a link to the PE firm and is expected to communicate results directly to them.

The Challenges Facing PE-Backed CFOs:

No two CFO positions are the same. When a CFO works for a PE-backed company, the challenges they face are slightly different. They’ll still face the same challenges as an organisation with organic growth, but with the complexity of a private equity firm being involved in the financing of the company.

These are the challenges you’ll want to be aware that your CFO will be facing.

1. Managing expectations

A PE CFO will be expected to manage expectations across the board, including that of the private equity firm. The high overturn of CFOs is linked to the fact that PE investors have no problem looking for the replacement of a CFO who doesn’t understand the importance of their position.

Not only does a CFO have to manage expectations, but they also need to hit the ground running and build credibility with the private equity firm as quickly as possible.

2. Technological innovation

It’s clear that technology is one of the leading factors in driving the growth and innovation of companies. PE-backed CFOs will be expected to manage the change being brought by technological innovation. They’ll be expected to feed data into their analysis and forecasting.

With technological innovation happening rapidly, most CFOs struggle to account for this within their strategy and analysis. A CFO who can unlock the potential of technological innovation can take their PE-backed company to the next

3.Focus on the Future

A PE-backed CFO should always have their eyes on the future. Gone are the days when CFOs could look back at how things were done in the past. The most successful PE CFOs are ones who have an entrepreneurial spirit and aren’t afraid to leverage technology to drive growth throughout the PE firm’s investment cycle.

4. Pushing for Evolution

Another challenge that PE-backed CFOs will face is their role in driving evolution. The CFO is someone with a wide range of responsibilities and who is expected to wear various hats throughout their job. They’ll have to utilize predictive technology to feed into their strategy and forecasting to feed into decision making.
Intelligent finance is something every CFO needs to utilize to allow them to focus on their strategy and maximize the value of the company at the exit.

This challenge comes from the fact that CFOs at PE-backed companies have one of the broadest roles in the leadership team. They’re expected to have a balance of soft and hard skills while being technologically savvy. If a CFO wants to be successful, they need to be able to drive evolution and innovation within the company.

What a PE-Backed CFO Should Bring to Your Business

When you’re going through the recruitment process of finding a PE CFO, you want to remember what they should bring to your business. While every CFO will have their own plan and strategy, there are things they should do to future-proof your company to continue its evolution.

1. Delivering frequent reporting

The CFO who will thrive within a PE-backed company can get on top of targeted reporting. PE firms want your CFO to have an in-depth knowledge of the KPIs and metrics within their reporting. You should CFO should be frequently delivering targeted reporting to update your stakeholders and PE firm.

Communication is vital to the role of CFO and it’s not uncommon to have executives from a PE firm meet weekly with your CFO. If a crisis happens or something isn’t going according to plan, PE firms will be keen to speak to your CFO on an even more regular basis. Your CFO should take a pragmatic approach to their reporting and be ready to deliver at virtually any time.

Your PE firm will want access to data-driven insights that can feed into the strategy to boost business performance for the best pre-exit results. Your CFO’s ability to identify, analyse, and utilize data will help create initiatives that deliver results in both the short and long term.

2. Playing a role in acquisitions

As a PE CFO is expected to take an analytical and data-driven approach to the company, they will play a pivotal role during any M&A activities. They’ll take an active role in analysing any potential deals and oversee the financial and strategic strategy.

Your CFO will use their knowledge to push for initiatives that focus on value within both organisations for maximum results. If you’re planning for an M&A in the future, you want a CFO who can develop a plan or deal model that they can calibrate and pressure test.

3. Living through uncertainty

Any CFO will tell you that the last two years have been some of their most challenging. The pandemic and its fallout have seen businesses at every level being impacted. Most companies have had to adapt the trajectory of their growth to make it more sustainable and prove their resilience to investors.

You’ll want your CFO to be able to feed in their insights from the pandemic into your future operating model. Few companies will go back to their pre-covid operations, meaning that CFOs are expected to adapt to further change and uncertainty.

A CFO who can adapt their strategy and respond pro-actively to uncertainty will impress your PE firm and present new opportunities for your company.

Hiring a PE-Backed CFO

A private equity CFO takes on a vital role within your management team. They’re expected to step up and take more strategic, financial, and operational responsibilities through their CFO role. When you work with a private equity firm, they’ll take an interest in whether your CFO is suitable for working with them during the PE life cycle. If your current or new CFO doesn’t meet their approval, you can expect them to ask for a change.

It’s these reasons why some CFOs choose to specialise in working with PE-backed companies, often staying for the duration of the PE life cycle. At FD Capital, our portfolio of part-time, full-time, and interim CFOs include financial professionals with experience dealing with private equity.

Are you searching for a PE-backed CFO for your company? Reach out to us today by calling 020 3287 9501 or using our contact form for a no-obligation consultation.