The Ideal Private Equity CFO: Expectations, Traits & Other Considerations

The concept of business, technology, the Internet and the network. A young entrepreneur working on a virtual screen of the future and sees the inscription: CFO

During periods of economic uncertainty, success for a private-equity-backed company requires focus and execution, proactive risk management, adaptable financial plans that factor in ever-evolving market conditions, and the ability to swiftly capitalize on growth opportunities – all of which falls to the hands of the Chief Financial Officer (CFO).

Oftentimes, the activities and effectiveness of the CFO will directly impact the company’s overall performance, which will in turn drive improvement to its valuation. Today’s CFO must work beyond the day-to-day finance and accounting functions to ensure a maximization of company valuation.  The CFO must be forward-looking and strategic, as well as hands-on and operational.

As experts in helping companies drive success through a robust offering of advisory services, we’ve outlined some of the main expectations of the CFO at a private-equity-backed company and some of the top traits the ideal CFO should embody.

What Makes a Successful Private Equity CFO?

The ideal Private Equity CFO will act as a strategic partner

The ideal CFO will act as a strategic partner to the CEO and the management team by developing a thorough understanding of the business and the dynamics of its target markets and uses that understanding to effectively influence management decisions.

By bridging the gaps between the company’s management team and the expectations of the PE firm and aligning its strategies with the overall PE firm’s original investment thesis, the ideal CFO will ensure measurable and reliable progress by developing and implementing short, medium, and long-term plans and creating meaningful KPIs to ensure the company is tracking to those plans.

In addition, an effective CFO will cultivate and oversee strategic relationships with the PE firm and other investors, banks, key customers, key vendors, and other stakeholders while working cross-functionally within the company to ensure alignment.

The ideal Private Equity CFO will leverage technology to support growth

In today’s tech-forward financial landscape, the ideal CFO will have obtained expertise regarding how to leverage best-in-class technology to foster efficiency, empower innovation, and inform reliable decision-making backed by real-time insights.

An effective CFO will achieve this by developing a deep understanding of the company’s data architecture (e.g., information systems, primary workstreams, data flows, security, etc.) and work with internal IT and third-party technology vendors to build an optimal data architecture and business intelligence environment that can support a high growth business strategy and the PE firm’s investment thesis (e.g., a “buy and build” strategy).

The company’s technology stack should also limit reliance on manual processes while ensuring the creation of reliable reporting and KPI tracking.

For more information about how the CFO’s role has evolved over time, head to our blog: 4 Reasons Why the Modern CFO Needs to Be Technology Focused.

The ideal Private Equity CFO will create a best-in-class finance and accounting function

By building a high functioning team, identifying opportunities for automation (e.g. procure-to-pay, order-to-cash), enhancing analytics, and implementing financial process improvements, the CFO will work to create a best-in-class finance function.

In addition, an effective CFO will build robust analytical processes to improve the company’s budgeting and forecasting and overall FP&A capabilities and contribute to the overall finance and accounting talent strategy by attracting and retaining skilled, high-quality employees.

The ideal Private Equity CFO will enhance working capital management and financial reporting

In addition to owning all aspects of the balance sheet and spearheading the company’s M&A strategy, the CFO will enhance working capital management and financial reporting by:

  • Establishing scalable processes and leveraging technology to forecast and manage cash and working capital and developing automated reports to provide improved visibility.
  • Utilizing a rolling 13-week cash flow model to manage liquidity.
  • Evaluating investments and balancing both the short-term and long-term impacts.
  • Producing monthly and quarterly financial packages for the PE firm and lenders and proactively address issues that may arise related to debt covenants.
  • Identifying operational drivers and combining forward-looking indicators with historical performance to create scenario analyses for management consideration.
  • Building reports at the business driver level to quickly produce meaningful metrics and provide timely, accurate information for real-time business decisions.
  • Ensuring the treasury function is robust and scalable.
  • Tracking pro-forma cost savings and one-time expenses, differentiating those that are driven organically or by those from an acquisition.
  • Produce weekly flash reports with relevant information to keep management informed and aligned.

Final Thoughts on the Expectations of CFOs in Private Equity

The CFO of a PE-backed portfolio company is critical to the success of that company. The role requires both strategic and operational proficiency, leadership and communications skills, and experience with change management and high growth. 

PE firms expect management teams to move at a rapid pace in driving the company’s valuation. The CFO sits in a position of key influence and is often the liaison between the management team and the PE firm. 

Whether you need strategic financial guidance or day-to-day operational support, or if you are navigating a transaction, there is inherent complexity at every phase of the journey. Bridgepoint Consulting can assist you by delivering actionable insights with strategic and operational expertise.

About Bridgepoint Consulting

Bridgepoint Consulting, an Addison Group Company, is a leading national consulting firm providing advisory services that help organizations optimize financial operation and technology utilization while mitigating risks. From assistance with strategy, process improvement, technology, or regulatory compliance, our experts create significant connections to bridge resource gaps, allowing companies to sustain and succeed at every stage of their lifecycle.

The firm’s practice areas include: Finance & Accounting Advisory, Risk & Compliance, Private Equity Advisory, and NetSuite consulting. Bridgepoint Consulting is headquartered in Austin with offices in Atlanta, Boston, Dallas, Denver and Houston.

Looking for a Trusted Partner?

Whether you need strategic financial guidance or day-to-day operational support — or if you are navigating a transaction — there is inherent complexity at every phase of the journey. Bridgepoint Consulting can assist you by delivering actionable insights with strategic and operational expertise.

Contact us today or learn more about how we can partner for growth at the link below.