How to become a high achieving Finance Director in Private Equity

How to become a high achieving Finance Director in Private Equity

Following our breakfast seminar last week with speakers from private equity firm Foresight, VC-backed signage manufacturer Metamark and our own director Paul Waite, we would like to share some of the main insights gained from this discussion.

 

Managing Your Career

One of the major points here applies to all levels of finance, whether you’re a business auditor or a well-established finance director. Concentrate on what you’re getting out of your current role.

The comfort zone and learning zone model is applicable here and according to Metamark CFO Matt Enright, you should aim for around 30-40% of your role to consist of day-to-day aspects and operations. The remaining portion should be pushing your existing skillset, interacting with other areas of the business and making yourself well-rounded professionally.

When it comes to the role of finance director in private equity backed businesses, you will often be the first experienced and qualified individual within the finance function. Having experience in getting into the nooks and crannies of different departments and gaining more strategic insight by doing this will be key to future success in this area. This is particularly relevant during the first year following investment, as this is typically a very hands-on period whilst finance becomes fully established within the business.

With finance director jobs in general, it comes down to fine margins in separating people with similar skillsets. You should always be analysing your current skillset and identifying gaps in your knowledge. E-Commerce is a great example of this as a growing industry which poses new and interesting challenges for the finance function. Being well-rounded is also applicable to life outside of work, as being open to new experiences and developing new interests are hugely beneficial traits to have.

 

Stakeholder Management

This should be a constant as your career develops and particularly if you’re looking to enter within a private equity backed business. Being able to come up with ideas and influence change with key decision makers will significantly aid your future development.

This becomes relevant within private equity backed businesses as during that first year period you may be the singular individual working on finance. Having an established network with banks, ex-colleagues and others within the industry you know and trust, will give you options when it comes to asking for advice or wanting an extra pair of eyes to look over something. Internally, consider the backgrounds of the people around you as well. If the chairman has a financial background, this can be a source of wisdom closer to home. The private equity firm themselves are also there to offer support should you need it.

Keeping your networks active and healthy is hugely important, not only to provide you with useful contacts but also to act as positive references once the need arises. One of the most vital stages of finance director recruitment is heavily referencing your network to give some reassurance and provide credibility to your ability to execute the things you say you can do. With Manchester in particular, it’s also worth bearing in mind that the business community here is relatively small, and burning bridges will come full-circle at some point in the future. Never lose sight of your long-term goals.

 

What to expect once you’re in the role

It’s fair to say there will be culture change, which should be a positive if things are handled the right way. Private equity firms will usually structure your package around the equity that you will receive. What this will affect on a day-to-day basis are the aims and structure of board activities. Having a focus on equity and with an eye on producing a successful exit in the next 3-5 years will often mean that the board is on the same page when it comes to making key decisions. Driving shareholder value should be the name of the game.

This alignment should allow the board to become more open and honest but will also place a greater degree of scrutiny on many decisions. You will have to go into more detail on things you wouldn’t usually spend a huge amount of time on; doing enterprise value calculations, covenants testing and in general being able to justify the investment case for decisions.

You should also be ready to be challenged on things by the private equity house from time-to-time, and consider things such as having to be involved in more legal activities. Writing non-disclosure agreements and employment contracts might fall under your remit during the first year of your role in a newly private equity backed venture. Understanding where the risk is in these areas and checking with the owners, investors or a solicitor if necessary, may be a role you might not have expected to get involved in.

 

Finer Details

Again, recruiting a finance director for a private equity backed business is an in-depth process that can be decided by the finest of margins. The detail you go into and the aspects you consider with your cash-flow statements to banks can be considered alongside more obvious factors such as experience in mergers and acquisitions, and in particular any successful exits you may have been involved with.

Further on in the process, you may also be presented with a briefing document on the current activities the business is getting on with, and where they see things progressing in the future. Being able to understand the current motivations, being able to probe around the decision making and ultimately coming to an agreement on the current vision for the business is vital in considering potential candidates. As previously mentioned, board alignment and having a shared focus within the management team is critical to getting any business to a successful exit.

 

Rowan Group

The Rowan Finance team sits at the heart of Rowan Group, working with entrepreneurs in the North West’s most exciting and fast-growing SME’s to identify, evaluate and recruit like-minded finance professionals in order to accelerate growth of their business.

As a group, Rowan also works in Sales, Marketing, HR and Operations. Providing solutions around the board for SME’s in the North West.