Value Creator: Today's Private Equity CFO
In recent years, the CFO’s remit has evolved rapidly across private equity portfolio businesses. What are investors and CEOs looking for in CFOs? And, what do CFOs need to do to impress? This blog is the first of a two-part series on the role of the CFO in private equity.
The rise of the value creator
In the private equity world, the days of the traditional bean-counting CFO are long gone. Technology and a greater focus on strategy have transformed the role. The pace of change is faster than ever. What investors and CEOS want are value creators from day one.
Yet, according to new findings from Deloitte, only 60 per cent of private equity businesses thought their CFOs understood their primary role in driving value. 75 per cent thought it likely they would replace a CFO if they don’t understand their role in creating value. Here’s what marks out the value-creating CFOs that private equity businesses want on their boards.
Strategist and decision maker
In the short life cycle of the private equity world, the CFO is expected to be the chief value extractor on the journey to a fast exit. The role is less about reporting, and looking back, and more about both present and future. CEOs want their CFO to be a chief strategist who leads on key decision making.
Partner to the CEO
CEOs want a CFO to act as a partner. The majority of board members and execs are representing their function or department. Only the CFO can truly see the business through the same objective lens as the CEO. When the CEO and CFO act as a team, objectives are reached faster.
Champion of technology
Technology has revolutionised finance. Freed up from reporting, CFOs have more time to focus on strategy instead. But, beyond this, CFOs who embrace technology’s possibilities are adding more value. A CFO can now present real-time data to boards via digital dashboards, not just last quarter’s figures in PowerPoint. There is huge potential in Big Data and AI. The CFO who understands and champions technology will outperform those who don’t.
Sometimes, in the rush to value creation, boards can take their eyes off of value preservation. Business needs to run smoothly with solid foundations in place: HR, legal, risk and succession planning. The CFO needs to know there is a safe pair of hands taking care of the day-to-day. The most effective CFOs have a great team around them – the value of the financial controller or chief accountant cannot be understated.
Change is central to the private equity investment lifecycle. CFOs have always influenced transformation programmes. Now they are expected to lead change – guiding functions or whole businesses on the journey. High level change management skills are rare in CFOs but increasing in demand.
Looking forward, the CFO’s role as value creator will continue to evolve. Private equity businesses need to hire CFOs ready for a volatile, uncertain future. CFOs have to keep building their skill-set to thrive in the tech-led world of tomorrow.
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