“The availability of interim managers has been invaluable to me. Interims have been particularly useful in turnaround situations, where skills are required to introduce changes the incumbent team are unable or unwilling to implement.” – Keith Jordan, chairman, various private equity investments, including Bank of Scotland and Murray Johnstone.
What are the ideal qualities of a successful interim CFO? Substantial change and transition implementation experience and the personal attributes to make it happen are essential. Without strong interpersonal and communication skills, gravitas and team leadership interim CFO für Startups capabilities, interim CFO’s are unlikely to succeed, however strong their technical background might be. The demonstration of these qualities is paramount, especially when an interim is parachuted into a crisis situation requiring a fast turnaround.
Interim Finance executives will have a track record of at least five to ten years at or near board level within companies with 20m to 2bn GBP turnover. They will have held a senior management position and/or have been a head of function.
In today’s economic cycle the interim CFO must immediately consider whether the investment has sufficient resources to withstand a downturn. Alternatively, can it withstand a serious competitive attack and respond by funding alternative investments to ensure survival and growth.
Key issues requiring immediate impact from an interim CFO in private equity investments include:
- turnarounds;
- de-risking and debt pay down;
- banking relationships and managing covenants;
- cash management;
- poor internal controls;
- build foundations for growth or market downturn;
- restructurings, downsizing and cost management;
- acquisition integration;
- mergers;
- Board conflict and acceptance;
- preparation for sale, liquidity event or transaction
Personal attributes for success of an interim CFO include:
- indications of a high achiever (someone who is proactive, results-orientated, positive, prefers a hands-on approach and makes things happen);
- politically sensitive without being drawn into the politics;
- -understands the need to stay objective and will not go “native,” particularly on an extended assignment. A private-equity firm will require the interim CFO to remain a strong link between them and the investment;
- -someone who can stick their neck out and say it how it is, using fine judgement;
- -not concerned with personal status and can take that necessary step down in responsibility level easily and willingly;
- -ability to operate at different levels and to demonstrate flexibility is essential in a change situation, where the goal posts can move from the day one steps into the assignment. Equally important is the need to adapt quickly to different cultures, sectors and organisations;
- -ability to establish immediate credibility – particularly KMU CFO important as the sponsoring client may have made a brave move in introducing the first interim executive into the organisation at or near board level;
- -the interim will take the team with them very quickly, establish themselves with their peer group and generally sell the concept of why they are there on arrival;
-exceptional interpersonal skills and positive attitude should be immediately apparent and their “over-qualification,” combined with a touch of humility, ensures quick integration. – financial security and fulfilled permanent career ambitions are also key requirements. The new interim executive is, in effect, undertaking a business start-up with all the associated risks. If financial security is lacking, the executive will have his or her eye on the permanent job market and will be an unsuitable candidate for true interim executive roles.
Financial Turnaround
The use of interim managers in private-equity investments has become an increasingly common method for turning around enterprises or pushing through key changes in specific business areas. The interim CFO has the personal and professional impact and experience to enable the rapid results sought by private-equity firms.
De-Risking & Debt Pay Down
The interim CFO will focus on de-risking the business and pay down of debt where possible. Areas of action include working capital and how better to manage it, tightening receivables and lengthening payables. A large amount of debt simply focuses the mind of an experienced interim CFO on cash. They will instinctively understand that the investment is on a three to five-year trail, and will have been proven in managing the seemingly opposing demands of defensively repaying debt, as well as a focus on value growth.
Cost Management
CFO’s in private-equity backed businesses will not be programmed to be emotionally attached to any aspect of the cost base. Each asset and each line in the P&L is will be reviewed against return and efficiency. Negotiation of supplier contracts is a key influence on cost base. The negotiation skills and commercial resilience of an experienced interim CFO will drive supplier to a better financial deal – and feed directly to the bottom line.
