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Working with the PE
Role of the Modern day
CFO by Vikas Chadha
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CFO is one of the earliest moves made by a PE firm upon adding a
company to its portfolio. PE investors want to track the Investee
Companys financial situation as soon as they are invested. While
the acquired portfolio company may have solid financial systems and
reporting, the PE firms first priority will be to upgrade the
financial structure and transparency by adding a new CFO.
PE investors prefer CFOs who have worked in both large and small
corporates. The large corporate experience provides an
understanding of sophisticated corporate systems and the experience
in a small company helps to test and enhance the CFOs
resourcefulness and ability to deliver when removed from the
expansive support systems of a large corporate setting.
Another valuable duality for the portfolio companys CFO is his
experience in working in both public and private companies. From
the public company experience,
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among other things, executives can gain a strong financial
reporting capability. While not all PE portfolio companies are
obligated to public reporting, PE investors crave financial data
that is equally timely, accurate, and insightful. Executives with
experience with sophisticated public company reporting systems tend
to be best equipped to plan, build, and manage an environment that
will provide that financial transparency to the PE investors. A
portfolio company CFO should be excellent in processes, be
financially disciplined and focused.
On the private company side, the experience of working with a
highly leveraged environment helps build a clear understanding of
the rigors and demands of working with private equity investors.
Comfortable working with limited resources, the CFO needs huge
persistence to reliably generate financial accuracy and
transparency. The unique analytical dashboard utilized by PE,
highlighting
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leverage ratios, margins and cash flow, must be second nature to
the CFO. Banking relationships are also critical, with banks today
demanding much more detailed information than was the case a decade
ago. The portfolio company CFO must be able to convincingly
demonstrate both goals and progress to the banks, ensuring that
banking relationships are nurtured.
Demonstrated competencies should include M&A expertise which
can be comprehensive i.e. from sourcing right through integration.
The CFO should be proactive, hands-on, detail-oriented and be
willing and able to function despite limited resources. Portfolio
Company CFOs will often find themselves needing to upgrade the
financial team as well as the financial systems. This requires a
leader who can identify, attract, and retain talent, while also
fostering talent development.
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In the PE environment, the CFO must be able to work effectively
amid the sometimes conflicting priorities and time horizons of the
multiple constituent groups. These include the banks, the private
equity investors themselves, the management team, and perhaps a
company founder or founding family. It is not unusual for the PE
investors and founders/ CEO to have far different agendas. Yet the
CFO must possess the diplomacy and communication skills to work
alongside all team members and make the business a Top Notch
productive operating model and bring the CEO, all stakeholders and
board members into alignment with the new operating plan.
- By Vikas Chadha, Chief Financial Officer, Berggruen Hotels Pvt
Ltd
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About the author: If theres a CFO who knows how to stay ahead
of
growing challenges and demands, it is Vikas. A qualified Charted
Accountant from the Institute of Charted Accountants of India and
Cost Accountant from ICWAI, he has over 18 years experience in
finance, business planning and strategy and has worked extensively
with start-up ventures, focussing on their turnaround and
profitability enhancement. He has worked extensively on Debt and
private equity funding and Mergers and acquisition opportunities.
He has a keen sense of business and in depth knowledge of all areas
of hotel operations. He also heads the Information technology
strategy for the group as well as all Legal and compliance
initiatives.
Vikass strength lies in financial planning and business strategy
along with fund raising, evaluating
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acquisition opportunities, implementing robust financial systems
and controls and optimizing stakeholder value. His networking
strengths keep him in touch with new strategies and solutions and
his passion for tennis and cricket helps him keep his eyes on the
ball.
Vikass previous assignments have seen him work at Tata Tea,
Thomas Cook and Marico wherein he has been Heading Finance for the
last 8 years. Source Link: http://mycfo.in/blog/?p=193 Website:
http://mycfo.in/
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