For the right kind of finance executive, the lure of a CFO post at a private-equity portfolio company is easy to see: a potential equity stake that could mushroom in value upon a successful exit, an opportunity to make a big impact, and, for some, the chance to escape the glaring spotlight at a public company.
But what is the job actually like? The short answer, based on CFO’s conversations with finance chiefs currently in such roles: exciting and exhausting.
Switching CFOs frequently accompanies the maturing of private equity–owned companies, notes Peter McLean, chairman of the financial-officers practice at recruiter Korn/Ferry. “When PE firms buy a business, they typically bring in a CFO with strong operational finance experience. At that point, it’s all about managing costs and cash flow. But there are often changes as portfolio companies get ready to go public or be sold.”
We asked four finance chiefs to describe their experiences in the dizzying world of private equity, and offer advice for those weighing whether to leap into the fray.
CFO: Rick Wimmer
Company: New Breed, a $700 million supply-chain logistics firm
Start date: November 2010
PE owner: Warburg Pincus
I had worked at Ernst & Young for 34 years. I was 56 years old, and in public accounting you’re going to be out at 58 or 60. So I started looking around. There were several offers, including one from a Fortune 100 public company. But I wanted the fast pace of private equity and thought it would work out better monetarily, anyway.
It’s my first CFO job, but I’d been half a seat away from the CFO during at least a dozen client IPOs and when working on complex financings and dealing with sovereign wealth funds. I worked with many private-equity companies.
After so many years with one employer, it’s a bit of a culture shock being somewhere else, but in many respects it’s not that different. When you deal with private-equity firms and the entrepreneurs behind them, you usually have to be able to thrive in chaos. You have to look at multiple paths simultaneously, and that’s not much different from having multiple clients and going from one to the next quickly.
One difference is that in a Big Four firm, you’re working with the top 2% of college graduates. They are the cream of the crop and highly motivated. Going to a private company, you may have many good finance people who are career individuals and doing great work in accounts payable and payroll, for example. But you have to think about how to motivate those people to create a high-performance team. That was a new challenge for me.
I’m trying to change the mentality so that my team understands that we are overhead, that the folks in the field — managers and sales — are the ones creating the revenue, and we need to think about how to help them. That means, for example, monthly trend analysis of direct operating costs as well as the indirect costs of such items as supplies, security, janitorial, among others. It’s almost like I’m trying to create a professional-services firm inside the finance group.