Interim CFOs: Building bridges across the PE and PortCo divide

Enter the interim chief financial officer (CFO). Bridging the divide between PE and PortCo requires tactical prowess, in-depth financial savvy, and strategic diplomacy. An interim CFO can serve full time during the transitional phase to provide the necessary leadership for a specific period. 

Engaging a highly experienced interim CFO is a wise solution if you can find the right one. This is not a long-term role, nor should it be an audition for a permanent CFO position. It takes a specific type of highly experienced CFO, with 25 years’ experience or more, who isn’t afraid to break some glass (so to speak), can hit the ground running, and can lay the groundwork for their PE while collaborating with the PortCo’s executive team to make an immediate impact in several vital areas.

Tactical

The deal is closed, the agreements signed, and celebrations concluded. Now what’s next? PortCos often face challenges in breaking through to the next level of growth. The company’s leadership might not have prior experience with an outside investor. This makes it difficult to communicate the vision and tactics necessary to deliver on the PE investment thesis, and to get a handle on everything it takes to prepare for what’s next. The initial phase once a PE firm is in the picture involves in-depth tactical planning. 

Skills and experience needed include:

• Forensic financial assessment;
• Streamlining operations;
• Understanding data availability (and any limitations);
• Financial planning and analysis;
• Cash flow forecasting;
• Restructuring acumen;
• Team building; and
• Having a clear and transparent communication style.

Diplomatic

While there may be a need to “break some glass”, there is a fine line between productive change and disruptive chaos. An experienced interim CFO can clear roadblocks to success with one hand, and help build a stronger, better, faster organisation with the other. 

Combining two ends of this necessary spectrum takes vast experience and having an approach that provides:

• Visibility;
• Professional sophistication;
• Productive change;
• Transformative outcomes;
• Expert execution; and
• Accountability.

Strategic

A long-term strategy is typically the primary focus of a permanent CFO, and while an interim CFO must be more tactical for a PortCo, as strategic nuance is necessary. An interim CFO works across all areas of an organisation, so there is no one better positioned to put together all the pieces for an initial roadmap, where short-term goals and objectives align with the long-term vision for growth. 

An experienced and business-savvy interim CFO will:

• Set the foundation for the permanent CFO;
• Establish initial data sets, key performance indicators (KPIs), and reporting metrics to “take the pulse” of the organisation and bring visibility on progress to the PE firm and PortCo leadership;
• Assist with finding and transitioning to a permanent CFO;
• Establish a high-performance culture within the finance and accounting teams; and
• Make recommendations for long-term objectives that the permanent CFO can execute.

The decision to hire an interim CFO can be one of the most important early moves toward a successful investment, and it can foster a collaborative, high-functioning relationship between a private equity firm and their new portfolio company.

This article was originally published on 03 June 2024 here.