"You Take Risks and You Own Them."

CFOs at private equity–backed companies love the challenge, and the payoff. Interviews with New Breed CFO Rick Wimmer, Culligan CFO Maria Henry, Eemax CFO David Brault, and Opal Ferraro, CFO of PSA Healthcare.

In a PE-backed company, you have a high degree of personal ownership for the decisions you make, and for putting up creative solutions, backed by analytics, that get buy-in from the owners. You take risks and you own them. That is very motivating.

CFO: David Brault
Company: Eemax, a $20 million manufacturer of water heaters
Start date: February 2009
PE owner: The Riverside Co.

Riverside is focused on smaller deals, so the CFO has to wear lots of hats. The biggest challenge I had going from a public company to a small private one, back in 2001, was the level of detail I had to get into. It was a priority for Eemax to evaluate whether I could get my hands dirty and be patient dealing with details, while also being strong enough to think strategically.

There was no technical support manager, so I stepped into that role. I’ve also used technology to make the order-to-cash process more efficient and helped the operations people develop a more efficient shipping process. And I bought a cloud-based package, NetSuite, that lets the manufacturers’ reps we sell to see their commissions online, enter sales orders, request credit memos, request technical support, and more (see “Now You See [Some of] It“).

I cut my teeth in the private-company world for seven years with a furniture company called Interlude Home, which was not private equity–sponsored. There are huge differences not only between public and private firms, but also between private and private equity–backed firms.

A lot of small private manufacturers, like Interlude, are held by one person or a family. You don’t get a lot of support. There isn’t much pushback in terms of questioning the strategy and looking at all the options. That can be a benefit in one sense, because you can get things done quickly, but you probably don’t have much bench strength.

Riverside has operating partners who are very involved in the portfolio companies, and there is a CFO that I report to. I like that. It makes the team bigger and there are more ideas. Every month we have an operating meeting where we go over operating metrics, and there is a defined structure to do that. It leads to a robust strategic-planning process and a more defined growth strategy.

Also, at a regular private company, all your eggs are in one basket. At a portfolio company, you still have some of that risk, but your owner may have investments in different industries. If something goes wrong with your industry — as was the case with the furniture business during the recession — you might have a safety net to find the next right position.

I’d heard a lot of horror stories from people at companies I used to work for that were bought by PE firms. Some firms focus on flipping companies within a year or two, but Riverside’s holding periods are much longer, more like five to seven years.

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