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As private equity firms look to maximize value from their investments, they tend to be quite influential in the selection process of Chief Financial Officers (CFOs) for their portfolio companies.
Private equity firms look for CFOs who can be both strategic and operational. They want a CFO who can support several aspects of the business, while also implementing the systems and processes to help a company scale.
Strategic CFOs
A truly strategic and operational CFO will be growth-oriented. They will often oversee multiple functions beyond Finance, such as Information Technology, Legal, Human Resources, Real Estate, and Supply Chain. CFOs of private equity-backed companies link between the financial sponsors and the portfolio asset.
The CFOs of a business at its growth stage don’t narrow their duties, but rather discuss all business decisions for the best financial interests of the company. The role requires a CFO to communicate financial results, face capital structure issues, assess M&A opportunities, and speak the language of finance with sophisticated investors.
Specifically, the CFO can oversee tasks like:
Innovation
Such duties play critical roles in research and development, company oversight, regulatory compliance, and day-to-day operations. CFOs, therefore, hold a pivotal role in innovation as they are getting increasingly involved in enterprise resource planning research. Each function of the company relies on its CFO’s duties: controllership supervision, treasury management and planning and forecasting on critical financial matters.
CFOs of small-to-medium-sized businesses manage the company’s increasingly sophisticated finances. Their responsibility includes reporting and analyzing the company’s past and present finances by overseeing daily financial operations and anyone else who handles them. CFOs weigh risk and liquidity factors and decide how to spend the resources while keeping the capital structure intact.
Shaping the business for Exit
All this information is necessary to forecast the company’s future performance by weighing in on products and services to determine their profitability. Therefore, the skills of a CFO are very important for companies looking to shape the business for an exit, whether it be through the launch of an IPO, a partial sale to another private equity or a full exit to a trade buyer.
Numitas is a finance consultancy with a large team of finance professionals with significant private equity experience in growth, value creation, disposal, exit and IPO.
We provide resources for operating performance improvement for Private Equity firms on demand and at no fixed cost. For more information, contact us info@numitas.com.
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