Brad Gerick, Author at BluWave

Challenges of Mergers and Acquisitions: Why They Fail

February 14, 2023 Brad Gerick

The majority of mergers and acquisitions fail. But why is that?

This can happen for many reasons: disunity, lack of communication, impatience, poor due diligence.

In any case, many of these failures can be avoided, either by better planning, or by calling off the engagement when the two sides realize it’s not meant to be.

We’re going to look at some of the more common reasons mergers and acquisitions fail, along with some potential solutions.

Success/Failure Rate of Mergers and Acquisitions

Instead of asking, “What percentage of mergers and acquisitions are successful?” you may be better off asking “Why do acquisitions fail sometimes?”

That’s because between 70-90 percent of M&As don’t work out, according to Harvard Business Review.

If you’re about to execute a merger or acquisition, don’t be afraid to seek outside, experienced help.

The right resources will know where your blind spots are and how to overcome them.

Here are some of the common M&A pitfalls, and how to avoid them.

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Vague Goals and Timelines

The acquiring must be crystal clear about what it wants to achieve and create a detailed plan to reach those objectives.

In many cases, the acquiring company may rush into a deal, perhaps because it sees an opportunity to acquire a competitor or gain market share. A lack of strategic thinking, however, can lead to poorly executed transactions that fail to deliver expected results.

Companies should instead take the time to develop a clear strategy. It should not only outline the company’s goals and objectives, but also specific dates by which they want to achieve them.

SMART goals are a good starting point, and may help avoid wasting time and resources on poor execution.

Overpaying for a Merger or Acquisition

Companies may become too focused on the potential benefits of the acquisition, leading them to overlook the true value.

They may also overestimate the potential benefits, and fall in love with ideas that will never become reality.

One example of this is when AOL and Time Warner infamously merged Jan. 10, 2000, in a $350 billion deal. Ten years later, the companies’ combined value was around 14 percent of what they were worth when the merger was announced.

There are many reasons why this marriage failed, but one thing is clear: the price tag was far too high.

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Poor Communication

This can be a major contributor to failed mergers and acquisitions because it often leads to confusion. Employees are often collateral damage to this crucial mistake.

If they don’t understand how the merger or integration will affect their job, they may start to develop anxiety and mistrust. This could snowball into a lack of engagement and motivation, leading to lower productivity and higher turnover.

Lack of communication may also mean companies don’t fully understand each other’s processes or objectives ahead of time.

Instead, they should develop clear communication strategies. This can by done via proactive updates and welcoming feedback from those who may not be directly involved in making decisions.

Unrealistic Expectations

Some companies expect acquisitions to deliver immediate benefits without fully understanding the time and resources required. This is a surefire way to put key stakeholders on edge, leading to disappointment and frustration.

The better expectations are managed from the beginning, the more time leadership will allow for everything to fall into place.

If you get everyone’s buy-in ahead of time, when the pressure does begin to mount, you can remind them about the original plan to which they agreed.

Misunderstanding the Company

Some key factors to understand about the target company pre-acquisition are its business model, market position or customer base.

This may be particularly difficult if the companies being joined have a lot in common. Perhaps their customer base is similar, but they have a completely different approach to acquiring new clients or sales.

It can sometimes be easier to join two companies that have little overlap. One example of this would be when Amazon bought Whole Foods for $13.7 billion in 2017.

“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO, at the time.

Amazon was not a leader in offering “natural and organic foods” before the acquisition, meaning they could rely on Whole Foods’ expertise in that area without the challenges of merging with an existing process.

Poor Due Diligence

If the acquiring company fails to conduct adequate due diligence on its target, they may overlook key risks or fail to identify potential synergies.

This is a smart time to bring in an experienced outside resource.

The BluWave-grade service providers in our network have helped PE firms hundreds of times in these exact situations. They leave no stone unturned so that both parties can move forward with confidence and begin their journey together without any surprises.

READ MORE: What is Commercial Due Diligence?

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Cultural Differences

When two companies have different cultures, values and management styles, it opens the door to conflict and perhaps lack of cooperation.

To address this, companies need to be proactive in addressing cultural differences and develop a plan for integrating the two cultures. This may involve cross-cultural training, mentoring programs or the development of a shared set of values and goals.

An interim CHRO can be a invaluable resource in these situations.

Operational Differences

Similar to cultural differences, operational differences can also pose a challenge in mergers and acquisitions.

The two companies may have different systems, processes or procedures, which can lead to inefficiencies or a lack of coordination.

The solution is to identify the key operational differences between the two companies and develop an integration plan. This may involve the adoption of new technologies or systems, or the development of new procedures or workflows.

Consider hiring a strong IT due diligence resource in these situations.

Regulatory Issues

The two companies may be subject to different regulations or legal requirements, which can complicate the integration process.

Carefully review each company’s regulatory environment to identify any potential obstacles or challenges.

Involve legal experts in the due diligence and integration process to ensure full compliance.

Mergers and acquisitions are complex transactions that require careful planning, due diligence and effective integration.

While there are many reasons why mergers and acquisitions fail, many of them can be avoided.

By proactively addressing the key challenges, companies can increase the chances of success in their new business relationship.

Fortunately, we have hundreds of expertly vetted service providers who know how to confront each and every one of these challenges, regardless of your industry.

If you’re considering merging with or acquiring another company, set up a scoping call with our research and operations team to see how we can help things go as smoothly as possible.

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IT Due Diligence Process: Mergers and Acquisitions

February 10, 2023 Brad Gerick

Mergers and acquisitions are complex processes that require due diligence in multiple areas. Information technology (IT) due diligence – a thorough evaluation of the target company’s IT assets, systems and processes – is one important aspect.

The goal is to identify any potential risks or opportunities related to the target company’s technology and make informed decisions about the transaction.

“It’s important to understand how well a company is using technology or how much of a risk or liability it’s become to a company,” BluWave Head of Technology Houston Slatton says.

Pre-Vetted IT Diligence Resources

One example of something companies look out for in IT due diligence is “technical debt.”

We’re going to get into more detail, though. Let’s talk about the importance and process of IT due diligence in mergers and acquisitions, especially as it relates to private equity.

READ MORE: Hire an Interim CTO

IT Due Diligence Overview

IT due diligence in M&As typically involve the following steps:

Preparation

The acquiring firm or company must define the scope of the process, identify key stakeholders and set expectations.

An IT DD team should have relevant skills and experience, set clear goals and expectations and determine the right timing for it to happen.

This lays the foundation for an efficient and transparent process from start to finish.

“To a certain degree, every company is a software company now,” Slatton says. “Technology is now critical to the functioning of every business, whether it is selling software or building widgets.”

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Information Gathering

Collecting data on the target company’s IT systems, assets and processes is the next step.

This entails conducting a comprehensive review of the target company’s systems, processes and infrastructure, as well as its software and application inventory.

All of this will be crucial to helping you make informed decisions about how the assets may impact the M&A transaction.

Asset Evaluation

Now it’s time to assess the value and functionality of the IT assets.

This includes both custom-built and commercial software and applications, as well as hardware, infrastructure and data management systems.

When evaluating these, consider their functionality, reliability, scalability and compatibility with your own systems and processes. Do they add something completely new? Is there a lot of overlap?

Look at how they may impact your organization post-acquisition, too. Both in terms of cost and integration into your existing IT environment.

Contract Review

The next step is to evaluate contracts and agreements.

This means everything from contracts with vendors to service providers to other third-party partners.

The goal is to identify potential legal and contractual risks or obligations that may impact the deal.

This will also help you negotiate better terms and conditions, if necessary.

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Risk and Opportunity Identification

Identifying any potential risks or opportunities related to the target company’s IT systems, assets and processes comes next.

You might start by assessing the impact of the assets on your own organization, as well as considering any risks or opportunities associated with the transaction as a whole.

Recommendations

Last but not least, you will present the findings of the IT due diligence process to make the most informed decisions possible.

This may include how best to integrate the target company’s assets into your own organization. Or measures that should be taken to address any identified risks or opportunities.

This final step helps ensure that the transaction goes as smooth as possible, and everyone is on the same page once papers are signed.

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The BluWave network is full of expertly vetted service providers who have helped hundreds of PE firms with IT due diligence.

“The better service providers will look at how well a company uses a tools they have and how well they have enhanced them to meet the needs of the business,” Slatton says.

Contact us to set up a scoping call, and our research and operations team will provide two or three tailor-made resources within a single business day.

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Sales Due Diligence: Revenue Streams

February 10, 2023 Brad Gerick

Sales due diligence is an essential aspect of the investment process for private equity firms. It not only helps PE firms evaluate the financial health of a target company, but it can also uncover hidden revenue opportunities.

READ MORE: What is Commercial Due Diligence?

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Understanding the Revenue Streams of a Target Company

Before a PE firm can maximize a target company’s revenue streams, it must first understand them.

Analyzing the company’s financial statements and sales data gives a clear picture of current revenue sources. The PE firm can use these to assess the strength of the potential acquisition’s stability, growth potential and profitability.

Here are five in particular to pay attention to:

Income Statement

This provides an overview of the company’s revenue and expenses, giving a clear picture of overall profitability.

Balance Sheet

Here’s where a PE firm can find the company’s assets, liabilities and equity.

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Cash Flow Statement

This document gives insight into the company’s cash inflows and outflows, and can help identify potential revenue streams and cash flow issues.

Statement of Changes in Equity

This provides information about the changes in the ownership structure of the company, which can impact its revenue streams.

Sales Reports

Provides a detailed breakdown of the company’s sales and revenue by product, market, and region.

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Identifying Revenue Leaks and Opportunities

Once the PE firm has a thorough understanding of the revenue streams, it can begin to identify areas where the company may be losing revenue or where new opportunities may exist.

It may discover, for example, that the target company has missed out on new market opportunities, is not effectively pricing its products or services or is failing to fully utilize its existing customer base.

By identifying these leaks, the PE firm can take steps to plug them and capture additional revenue.

Revenue Stream Diversification

In addition to identifying leaks, the PE firm can also research how it might diversify.

One way to do this is by developing new products and services. Another would be entering new markets or acquiring complementary businesses.

The key is to identify areas of growth and to develop a strategy that leverages these opportunities to maximize revenue.

Implementing Revenue-Driven Strategies

Finally, a PE firm can implement revenue-driven strategies to maximize existing revenue streams.

Here are a few ways they could do this:

Streamlining processes
Improving customer service
Enhancing marketing efforts
Investing in new technologies or equipment

The ultimate goal is to increase the target company’s revenue, profitability, and overall success.

By performing sales due diligence to assess the revenue streams of a target company, private equity firms can uncover hidden revenue opportunities and maximize profitability.

Our research and operations team is standby to connect you with an exact-fit resource from the Business Builders’ Network.

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Private Equity Recruiting: Portco Resources

February 10, 2023 Brad Gerick

Private equity portfolio companies have a unique set of challenges when it comes to attracting and retaining top talent. The stakes are high, as the success of a portfolio company can make or break a private equity firm’s investment.

That’s why it’s crucial to have the right resources and strategies in place to recruit effectively.

Specialized Recruiters by Industry

With so many portcos to manage, private equity firms can struggle to attract and retain the right talent.

Competition is fierce, especially if resources are limited and the portco isn’t a known entity. Additionally, not everyone is cut out for the fast-paced and high-pressure environment of private equity.

Let’s talk about what PE firms can do to hire standout performers for their portcos.

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Effective Recruiting for Portfolio Companies

So, how can private equity firms overcome these challenges and recruit the talent they need to succeed? The key is to have a well-thought-out and proactive approach. Developing a strong brand and reputation can go a long way. So can having a robust pipeline of candidates and using innovative recruiting strategies and technology.

Having the right strategy in place isn’t always enough, though. It’s also crucial to execute effectively.

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Step-by-Step Approach to Portfolio Company Talent Acquisition

Here are some steps private equity firms can take to attract and hire top talent:

Define the Roles and Skills You Need

Start by identifying the key positions and skills you need to fill at each portfolio company. This will help you narrow your list to only the most qualified candidates instead of wasting time with people who don’t have the right skillset.

To put it another way, you wouldn’t hire a chief technology officer with zero coding experience.

Develop a Strong Employer Brand

To attract top talent, you need to have a strong reputation and brand as an employer. This includes promoting your company culture, values, and opportunities for growth and development.

A great way to do this is by using social media to show off your company from the inside. You can also work with a PR firm – or someone internally – to connect with journalists at prominent publications that cover your portco’s industry.

A quality article by a reputable publication creates a lot of credibility.

CASE STUDY: Recruiting a Turnaround CEO for Sporting Goods Manufacturer

Build a Robust Pipeline of Candidates

Having a deep bench of qualified candidates is crucial for filling positions quickly and efficiently. Use a variety of sources to find them, including employee referrals, job boards, social media and recruiting events.

You can also work with specialized recruiters who are skilled in finding best-fit candidates for specific situations.

At BluWave, we don’t actually “find” candidates when you contact us. That’s because we already have dozens of them on standby for whenever a need arises.

If you’re looking for a specialized recruiter to build the perfect team, we have the service provider for that, regardless of your industry. And if you want to get straight to hiring your dream individual, we have proven PE-grade candidates ready to interview.

Even if you’re not a PE-backed business, our resources are primed to work for private and public companies, too.

Utilize Innovative Recruiting Strategies

Don’t underestimate the power of technology. This can make for a more efficient process by helping with things like applicant tracking, conducting virtual interviews or leveraging data and analytics.

There are business intelligence and analytics resources who specialize in this. Let us know if you want to speak with one of them.

Continuously Evaluate and Improve

Finally, it’s crucial to continuously evaluate your talent acquisition processes. This includes regularly assessing the effectiveness of your recruiting efforts, making changes based on your results and staying up-to-date with the latest best practices and trends.

No matter how good your process is now, we believe in constant refinement. Especially in today’s fast-changing, uncertain business world.

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Innovative Solutions for Finding and Attracting Top Talent

Once you have your system in place, you can focus on something we mentioned above: developing a strong brand.

All other things being equal, is a candidate more likely to work for a company of which they have never heard, or a well-known industry titan that will stand out on their resume? Probably the latter.

But even if your portco isn’t that big-name company yet, it doesn’t mean you can’t work toward it.

Here are some innovative solutions private equity firms can use to find and attract top talent:

Virtual Recruiting

With the rise of remote work, remote recruiting has become increasingly important. Virtual tools, such as video interviews and online career fairs, can help private equity firms reach a wider pool of candidates and make more informed decisions.

Even if you’re not willing to let someone work remotely, at least making the interview process as convenient as possible – especially if they already have another job – can go a long way.

CASE STUDY: Elevating IT Leadership for Tech-Enabled Compliance Services

Employee Referrals

Referrals are a powerful way to attract top talent. Encourage your existing employees to refer their friends and colleagues and reward them with one-time payouts, extra vacation days or gifts.

You never know when someone in finance could have a connection to the perfect fit for a new IT role, for example.

Employee Development Programs

Investing in employee development and training can help retain top talent and attract new hires. Offer opportunities for career advancement, continuous learning and professional growth to keep your employees engaged and motivated.

A prospective candidate may be willing to choose your company over a competitor if you pay for their school or send them to conferences on company money.

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Maximizing Your Private Equity Talent Acquisition Efforts

Private equity firms that take a strategic and proactive approach to talent acquisition are well positioned to succeed. But it’s important to remember that the best strategies and solutions are only effective if they are executed effectively.

Here are a few tips for maximizing the impact of your talent acquisition efforts:

Partner with the Right Providers

The right recruiting and HR providers can help private equity firms execute their talent acquisition strategies effectively. Look for providers with a proven track record and expertise in private equity recruiting.

The BluWave network is full of expertly vetted interim CHRO candidates who know exactly what to do in these situations.

Foster a Culture of Collaboration

Open communication across departments – and between the PE firm and portco – can be a big help. Encourage regular information sharing to ensure a consistent and effective approach.

Continuously Evaluate and Improve

Whether using data software, as suggested above, or conducting face-to-face exit interviews, the better you understand what makes top talent leave – and stay – the better prepared you’ll be to find that next dream candidate.

At BluWave, we have helped hundreds of PE firms find exact-fit candidates for their portcos.

Whether looking for an interim CFO, or in need of a specialized recruiter to help you find a new CRO for a niche industry, we have talent and service providers on standby.

When you go through scoping call with our research and operations team, they’ll provide two or three best-fit solutions in less than one business day.

From there, we’ll be by your side from the first introduction all the way until your project is complete to hold resources accountable.

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Interim CHRO Interview: Identifying the Right Fit

January 27, 2023 Brad Gerick

Demand for interim chief human resources officers in private equity continues to climb.

It’s no wonder: Human capital is consistently a top service area in the BluWave Value Creation Index.

But how do you know which HR leader to hire?

Once you narrow your pool to the finalists, it all begins with the interview process.

You’ll want to ask about their work history, industry experience, people philosophy and more.

In this guide, we’re going to tell you what the interview should look like, and how to identify a winner to lead human resources on a temporary basis.

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Questions to Ask Interim CHRO Candidates

When interviewing an interim CHRO candidate, it’s important to ask a variety of questions that will determine whether they’re PE-grade.

Here are some essentials our consulting mangers Keenan Kolinsky and Scott Bellinger recommend:

Can you tell us about your background and experience in human resources leadership?
What is your experience with mergers and acquisitions?
Which Private Equity firms or Private Equity-backed businesses have you worked with that you can provide as references?
How do you stay current with the latest trends and best practices in human resources?
How could you help our HR function be more of a value-creation lever?
What experience do you have with high growth, middle-market companies?
Can you tell us about a time when you had to lead a project or initiative that required you to adapt to a fast-paced environment?

CASE STUDY: Interim CHRO Leads Complex Carve-Out in Consumer Products Industry

How to Evaluate Human Capital Leaders

Once you have the answers to those questions, and whatever else you come up with, it’s time to match them with your portco’s immediate needs.

Since this role is typically filled for 3–9 months, you want to make sure you hire someone who can have a maximum impact in a short amount of time. Here are five key areas to evaluate:

1. Experience and qualifications in human resources leadership

The interim CHRO should have experience in areas such as talent management, employee relations, and organizational development.

These, however, are just a few of the HR-specific criteria to consider.

2. Industry Experience

They should not only have private equity experience, but also within your particular industry.

Don’t hire someone who’s worked in technology their whole career to run your manufacturing company. And don’t high a talent chief from the manufacturing industry to work in healthcare.

3. Experience with M&As

Mergers and acquisitions experience is key, according to BluWave Strategic Account Executive Hannah Welsh.

“This person has to be able to navigate the complexities of integrating different companies and cultures,” she says.

4. Problem-Solving Abilities

A track record of solving complex HR challenges and quickly identifying and addressing problems is also essential.

“They should also be able to work in a fast-paced environment and have the ability to adapt to change,” Welsh adds.

5. Strong Communication Skills

Lastly, they should be a strong communicator, especially across the organization.

That means explaining complex issues in simple terms. It also entails building relationships with employees, stakeholders and clients.

If you find someone who hits the mark in all five of these areas, you’re well on your way to selecting a strong interim CHRO.

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Managing Expectations for People Leaders

Setting and managing expectations is crucial for a successful partnership between the PE firm and the interim CHRO. The interview process is a great time to do that.

Have open and honest conversations from the start to ensure that both parties are on the same page. Here are some things you should discuss:

The Scope of the Role

What are the company’s specific needs that you hope this candidate will address?

In addition to the recommended questions above, you’ll want to talk about challenges specific to your situation.

Is there high turnover? A PR crisis? Lack of professional development? Discuss specific scenarios during the interview.

Specific Goals and Objectives

What specific things to you want them to accomplish?

Goals could be based on reducing turnover, increasing productivity or implementing a new company structure within a given timeline.

Available Resources

Will they want to make new hires? Implement a new software? Use consultants?

When evaluating the cost of hiring the candidate, make sure you’re taking more into account than their compensation.

It’s often well worth it, though, as there are many benefits to hiring a interim chief human resources officer.

The interview process plays a crucial role in identifying the right fit for a talent leader at a private equity-backed organization, or even private and public companies.

At BluWave, we make sure you get connected with two or three exact-fit solutions so you can skip the search process and get to know your candidates sooner.

Contact our team today to save time and tap into the BluWave-grade service providers in the PE-grade network.

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Hire an Interim CHRO: Navigating Challenges, Creating Value

January 27, 2023 Brad Gerick

Interim chief human resources officers are becoming a more and more popular request in the world of private equity.

That’s no surprise, considering how effective an effective interim CHRO can be with crisis management, navigating mergers and acquisitions, setting up a human resources department from scratch and more.

“It’s a functional area that’s been historically overlooked,” BluWave head of Research and Operations Keenan Kolinsky says. “Private equity hasn’t viewed it as a critical function to drive value historically. But like we’ve seen over the last two years private equity is increasingly viewing human capital and HR as a value-creation driver.”

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We’ll walk you through the benefits of an interim CHRO, what to look for when hiring and how to go through the entire process so you select the right one for your portfolio or private company.

Benefits of Hiring an Interim CHRO

Quarter after quarter, human capital accounts for the lion’s share of private equity activity in the BluWave Insights Report.

With so many important projects tied to talent, most companies can’t afford to be without a head of people for weeks, let alone months on end. That’s why an interim chief human resources officer can be a great option to bridge the gap.

“An interim CHRO is a seasoned executive that can come in, bring best practices to a growing middle-market company and help build a best-in-class HR function,” BluWave Co-Head of Research and Operations Scott Bellinger says. “This can range from talent acquisition, employee retention, benefits, employee handbooks and more.”

Post-Merger Integrations

Integrating two teams into a single, well-functioning organization can be a challenge. That’s when an experienced talent executive can make the transition much smoother.

“No other functional interim executive is going to be able to effectively advise on the org design and sizing components associated with integrating businesses,” Kolinsky says.

Crisis

An interim CHRO can also provide the leadership and guidance needed to handle a crisis. These may include:

A high-profile employee termination
A significant reduction in workforce
Facing bankruptcy
Employee misconduct
Cybersecurity attacks
Hostile takeovers

Create Structure

An interim CHRO can provide an unbiased view of your company’s HR practices, identify areas for improvement and recommend changes. This can be particularly valuable if your HR department has been struggling to keep up with the demands of a rapidly growing company.

“A lot of CEOs or founders have never known what good looks like as it relates to CHROs,” Bellinger says. “It’s important to make sure you have a great talent pipeline, great employees and that you’re training them properly. This allows the CEO to focus on commercial and operational initiatives and leave the other stuff to the CEO.”

The right person will also help companies that don’t have an existing structure implement a proper HR infrastructure.

“Most traditionally founder-led businesses don’t have PE-grade infrastructure in place for the company to prepare for growth,” BluWave Strategic Account Executive Hannah Welsh says. “In many circumstances, interim CHROs can be brought in to lay the groundwork for the right people processes.”

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Candidate Criteria

These are some of the main factors to consider when hiring an interim CHRO:

Industry Experience

You want someone who’s familiar with the nuances of your industry and the specific challenges and your company might face.

“For example, you wouldn’t want to bring a tech-based executive into a manufacturing company,” Welsh says. “They both have different processes that need to be implemented.”

We most commonly see companies in the manufacturing, business services and healthcare industry hiring interim CHROs. They can be an asset for any company that needs HR guidance, though.

CASE STUDY: Interim CHRO Leads Complex Carve-Out in Consumer Products Industry

Leadership Skills

An interim CHRO should have strong leadership skills and be able to manage and motivate your human resources team.

This means clearly communicating not only within their own group, but also across departments.

When working for a portfolio company, the PE firm may also expect regular reports from the talent lead, almost acting as a second manager along with the CEO.

“To work effectively, they should also be a part of the executive team. They should be a thought partner, because human capital helps the business grow,” Welsh says.

Human capital resources accounted for half of 2022 initiatives – up 2 percent from the previous year – within the Value Creation portion of the BluWave Activity Index.

ALSO SEE: BluWave Interim CFO Resources

Problem-Solving Abilities

They should also have a track record of quickly identifying and solving complex HR challenges.

“You’re used to integrating companies. You’re used to hiring quickly. You’re used to speed,” Bellinger says of the ideal candidate.

Some HR-related issues a company may face include:

High employee turnover
Lack of organizational structure
Lack of diversity
Employee health and well-being
Managing relationships

Cultural Fit

The ideal candidate should also fit in well with your company. Whether your team is laid back or more buttoned up, your head of HR needs to be able to relate to them.

“I would want to make sure I was very explicit in making sure I understand exactly what the roles and responsibilities are,” Bellinger says. “Make sure it’s something they can accomplish. If the interim CHRO is not very explicit in exactly what they want to get done, the PE firm is going to have a very short fuse.”

Flexibility

As you might have gathered from the other criteria, this position is anything but predictable. Select someone who can roll with the punches.

This includes the ability to quickly adapt to a company’s culture and management style, as well as handle unexpected situations such as a crisis or change in leadership. They must also be able to pivot their approach when necessary to remain aligned with the organization’s objectives.

Some examples may include leading a downsizing while minimizing negative impact on morale, or being able to shift focus to DEI initiatives in response to social and political changes.

Interim vs Full-Time CHROs

One of the main advantages of hiring an interim CHRO is flexibility. They can be brought in on a short-term basis to address specific needs, and then let go when they have been met.

This can be more cost-effective than hiring a permanent CHRO, or if your company is in flux and the future is uncertain.

You may end up hiring that same interim executive full-time, but by starting them on a temporary basis, you can “try before you buy.”

On the other hand, a permanent CHRO can provide continuity and stability for your company’s HR department. A long-term hire will also have more time to develop a deep understanding of your culture, processes and employees.

How to Find the Right Interim CHRO for Your Company

The “right” interim CHRO is going to be different for each company. It will depend on some of things mentioned above, such as culture, industry and other specific needs.

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After identifying the criteria for the role you want to fill, cross-checking candidates with past work experience and references can narrow the field.

Fortunately, BluWave’s highly vetted network has already done that for you. We only admit experienced talent that has passed a rigorous pre-interview process and received positive references from the world’s leading PE firms.

When you contact us for a scoping call, we provide two or three PE-grade interim CHRO candidates, hand-picked for your exact situation, within a single business day. By jumping directly to the interview process, you’ll save weeks, if not months of searching.

“Our vetting process clearly surfaces whether a candidate will be a great resource for a company, and if not, we won’t waste their time with an introduction,” Welsh says.

CASE STUDY: Immediate HR Diligence Provider Needed

The Hiring Process

Once you meet the candidate (or two or three) that’s best suited for your vacancy, it’s time for various members of your team to speak with them. This will give you a 360-degree perspective on their skillset.

You should also have a clear understanding of their availability and expected compensation. If everything lines up, it’s time to draft an engagement letter outlining expectations, pay and timeline. (When you work with BluWave, we take care of all this for you.)

Once you hire the right person, the next step is to onboard them effectively. Due to the selection process, they should already have a clear idea of expectations from day one, as well as the resources at their disposal.

“They’ve got to get up to speed very quickly,” Kolinsky says. “They need to explore what they have. What people, processes and technologies exist in this functional area, and how it can be improved and optimized.”

Hiring an interim CHRO can provide a range of benefits, but it is important to choose someone who fits within your company culture and has the right skills for your situation.

Interim leadership is consistently a top priority for private equity firms within human capital services. With such high demand, BluWave maintains a pool of experienced, vetted professionals – including interim CHROs – in the Business Builders’ Network.

Connect with our research and operations team to walk us through your specific project, and we’ll connect you in less than 24 hours with a short list of tailor-made candidates.

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Private Equity Interim CHRO: What Are the Benefits?

January 25, 2023 Brad Gerick

An interim chief human resources officer can be a great asset to maximize a portco’s value.

They can help a business run more efficiently by evaluating existing HR processes and aligning them with business goals.

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Whether going through an M&A, an internal crisis, a reorg or other situations that require a talent expert, here are some reasons private equity firms should consider temporary HR leaders.

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Increase Efficiency and Effectiveness

A human capital leader has the opportunity to improve company operations for the short time they’ll be in their role. (Usually three to nine months.) Here are some ways they can do so.

Streamlining HR Processes

They can evaluate existing HR processes at a portfolio company, identify areas for improvement and implement changes to increase effectiveness. This may include automating repetitive tasks and standardizing processes across the organization.

For example: expediting a labor-intensive employee onboarding process with new software. They could also implement a standardized performance management system so that everyone understands how they’re evaluated.

CASE STUDY: Interim CHRO Leads Complex Carve-Out in Consumer Products Industry

Improving Data Management

Temporary CHROs can also collaborate with the tech team to improve data collection, storage and analysis. This makes it easier for management to make educated decisions.

One way they could do this is by creating dashboards accessible to managers. These, and other tools can streamline analysis relevant to growing the business.

Aligning HR with Business Goals

The human resources department’s objectives must also align with the portco’s goals.

Identifying and tracking KPIs – employee turnover rate, time to fill, employee engagement, DEI initiatives – is one way to do this.

The interim CHRO interview process is a great time to determine whether the person you want to hire works well across departments.

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Reduce Employee Turnover, Increase Engagement

Conducting Exit Interviews

Exit interviews help managers understand why employees leave and identify what contributes to a high turnover rate. This information can be used to develop retention strategies and improve employee engagement.

Here are some of the questions an interim CHRO might ask a portco employee during an exit interview:

What made you decide to leave the company?
Is there anything you disliked about working here?
Do you have any suggestions for how we can improve?
How was your experience with your manager?

Creating Employee Retention Programs

Retention programs address the specific needs of employees, such as recognition programs, professional development and the ability to work from home, even in a hybrid situation.

Employees may also be more likely to stay if they have access to department-specific job training.

HR leaders can also use engagement surveys and focus groups to identify problems ahead of time.

Identifying Key Drivers of Employee Satisfaction

Speaking of surveys and focus groups, they not only tell HR leaders what’s going wrong but also tell them what employees like about a company. This information can help create targeted retention strategies and improve employee engagement.

Here are some of the top areas of employee satisfaction an interim chief human resources officer will want to pay attention to:

Clear communication and transparency
Opportunities for growth and development
Work-life balance
Recognition and rewards

Building a Positive Company Culture

Creating a positive company culture is no easy task, especially in the midst of a transition. That’s why it’s important to work with an interim CHRO experienced with tumultuous situations.

Besides paying attention to employee satisfaction, this person should be able to build consensus across teams.

“In a strong culture, employees feel valued,” according to Great Place To Work. “They enjoy at least some control over their jobs, instead of feeling powerless. Whether it’s by working from home, choosing their projects or trying out a new role, employees that feel valued and can make decisions achieve a higher level of performance.”

Providing Regular Feedback and Recognition

An interim CHRO can help managers to provide regular feedback and recognition to employees.

They can standardize feedback loops through surveys, one-on-one meetings, focus groups and other tactics. They should then be transparent about how they will use that information to improve the company.

It’s important to do this on a regular basis, and not as a one-off exercise.

Since this person will only be in their role for a few months, having monthly, bi-weekly or even weekly evaluations may make sense. Especially if they can develop a system that can be inherited by the person who will take on their role full-time.

Compliance

An interim CHRO with experience in your industry can hit the ground running. Every business has a unique set of legal challenges, and you don’t want someone in the C-suite who has to learn on the job.

Here are some specific areas where a temporary CHRO can help with legal hurdles.

Reviewing and Updating Company Policies and Procedures

This ensures a company is compliant with all relevant laws and regulations, such as those related to labor, anti-discrimination and data privacy.

This should be done in collaboration with other executive team members as well as the legal team.

Conducting Compliance Audits

Compliance audits help identify areas of legal risk and recommend corrective actions.

The head of people can do this by developing an audit plan with a clear scope. They’ll then determine risks, gather evidence and analyze the information. In the end, they should prepare a report based on their findings.

They’ll also need to implement the plan quickly to minimize risks to the company.

Providing Training and Education

Another way to protect the company as well as equip employees is to educate them on compliance and labor laws.

Here are some resources an HR executive might use for this:

Monitoring Changes in Laws and Regulations

This person should also be current on changes in laws and regulations. Company policies and procedures should then be updated accordingly.

Use the interim CHRO interview process to evaluate whether they have the knowledge to make an impact in this area from their first day.

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M&A Integration

Developing and Implementing a Communication Plan

A comprehensive communication strategy informs employees about the transaction and its implications.

The head of HR may do this with a dedicated website, by holding town hall meetings or providing regular updates. They may also work with management to develop a Q&A document and establish an employee hotline.

Managing Cultural Integration

A seasoned executive will improve cross-company integration by addressing differences in culture, values and internal practices.

They do this with shared vision and values, aligning policies and procedures and promoting cross-functional collaboration.

Mary Anne Elliott, CHRO at Marsh, talked with HBR about the importance of working with other top executives on this.

“[These] meetings are a pragmatic activity. When you’re sitting with the CEO and CFO, there’s no place for academic HR,” she says. “It’s all about understanding what the organization needs to do to drive business performance and how to align those key variables.”

Assessing and Managing HR Risks

Some typical risks associated with a merger or acquisition are employee retention, legal compliance and benefits integration.

A capable temporary people leader will know how to do each of these things efficiently.

Coordinating Benefits and Compensation

Coordinating the integration of benefits and compensation packages for employees is also important.

Health insurance, retirement plans and stock options are just a few examples.

Reviewing existing benefits packages can help them identify gaps or redundancies.

Integrating HR Systems and Processes

Finally, an interim chief human resources officer can manage the integration of HR systems and processes such as payroll, performance management and employee data management.

The new, combined organization’s HR processes must be aligned with the needs of the business.

The IT department can help in this area by ensuring a smooth transition of data and systems.

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Succession Planning

Identifying Key Roles and Critical Skill Sets

Some roles are more crucial to a company’s success. The interim CHRO should identify these and devise a strategy to make sure the right talent is in place if someone leaves.

They can also identify potential leaders within the company who lack professional development.

Conducting Talent Assessments

Internal assessments help identify high performers. Since these are the people most likely to leave for another opportunity, it’s worth investing time in their development.

By aligning these evaluations with company goals and leadership needs, the employees will be better equipped for a new role.

This will open the door for them to be promoted sooner as they grow within the company.

Creating Development Programs

An interim CHRO can design development programs to help high-potential employees acquire the skills and experience needed to take on leadership roles.

These are some ways they might do that:

Rotational assignments
Mentorship programs
Professional development courses
Cross-functional team assignments

Building a Talent Pipeline

While it’s important to foster talent internally, an interim CHRO can also establish an external talent pool. Outside hires often help the company by bringing a fresh perspective to a challenging situation.

Having a group of qualified candidates on standby also saves time in the hiring process.

At BluWave, we have a highly vetted group of candidates for private equity, portco and privately owned company needs on standby. That way, we can provide you with two or three exact-fit resources within a single business day.

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Developing a Succession Plan

A comprehensive succession plan will not only focus on identifying, developing and retaining key talent, but also contingencies for unexpected departures.

Along with mentoring and coaching programs, regular performance reviews ensure that employees are ready to take on new roles when needed.

If your private equity firm or portco leader needs a human capital expert, BluWave has the world’s best temporary chief human resources officers on standby. And if you’re already in a talent role, we have tailor-made solutions to support you, too.

Everyone in our network has been rigorously evaluated while also receiving multiple recommendations from other leading PE firms.

CASE STUDY: Immediate HR Diligence Provider Needed

Reach out to set up your initial scoping call with our research and operations team, and we’ll provide you with two or three exact-fit candidates, no matter how urgent your need, within one business day.

Interim CFO for a Financial Crisis

January 13, 2023 Brad Gerick

When a company faces a financial crisis, an interim chief financial officer can make all the difference in a successful turnaround.

Whether going through a restructuring, facing bankruptcy or other challenging financial situations, an experienced financial leader is essential.

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Situations for an Interim CFO

A financial crisis can be due to something within a company, external economic forces, or both.

Poorly responding to a distressing financial situation can destroy a business. A capable interim CFO, however, will know how to navigate the following scenarios.

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Bankruptcy

The two most common bankruptcies a company will file for are chapter 7 and chapter 11.

When a company files for chapter 7 bankruptcy, it plans to shut down.

Chapter 11 bankruptcy, though, means a company is still viable but needs help relieving some of its debt.

While an interim CFO would seldom take on a chapter 7 bankruptcy, it’s common for them to step in and help a company try to avoid chapter 11 bankruptcy. If it’s not avoidable, a temporary chief financial officer can also help navigate the situation.

“A very good interim CFO can be a lot of help because they come in and they look at, ‘What are the things between gross profit and net earnings that are negatively impacting the business?’” BluWave controller Justin Scott says.

Cost-saving measures could include lowering headcount, cutting advertising costs or negotiating with creditors, which we’ll discuss more below.

Restructuring

While most restructuring situations are tied to bankruptcies, there are exceptions. Here are some of the more common ones.

Carveouts

An interim CFO who can adeptly perform carve-out tasks is key for organizations looking to sell off part of their company. That can mean getting their hands dirty setting up general ledger architecture or determining which employees to include in the sale.

“Let’s say 25 percent of the existing team is going with the carve-out, then I’ve got to decide ‘What’s the 25%? How are those processes going to work?’” Scott says. “Where you typically see the carve-out CFO come in is because they don’t want all of those activities to take away from the core business that the existing CFO is already managing.”

CASE STUDY: Interim CFO with Expertise in Commodities, Hedging for Manufacturing PortCo

M&A Integration

An acquisition, of course, is the opposite situation. The finance executive must determine how to integrate multiple teams in the same company.

“You likely have multiple sets of books. You have multiple systems. None of them talk to each other,” Scott says. “Essentially, you’re running parallel systems or parallel processes for everything. And then you have to manually consolidate everything and that’s just no fun.”

Ginessa Ross, who is often the first point of contact for interim CFOs BluWave works with, says lots of clients have been emphasizing M&A skills recently.

“All sides of it, whether it be due diligence, post-merger integration or prep for sale – having M&A experience, especially in private equity, is key,” she says.

Cost Savings

A turnaround CFO may be sought when accounts payable get out of control.

If the internal team has become bloated, they’re likely to partner with someone in human resources to reorganize the company more efficiently.

“It’s not typically just finance here. It’s typically that a new technology has been implemented that’s changed the field and headcount needs to be reduced,” Scott says. “How do we eliminate or mitigate the overhead expense of the SG&A of what’s happening today?”

They may also cut marketing costs or improve operations to find savings. This can be done by spending less on advertising, implementing automation tools or canceling automated subscriptions, for example.

Hostile Takeover

Although unusual, there are times when a temporary finance executive is brought in for a hostile takeover.

“It is possible to go to an interim CFO as a stopgap,” Scott says. “But it’s not a likely scenario.”

More often, the company executing the takeover will already have a CFO in place.

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Skills Needed for a Financial Crisis

What skills does an interim CFO need in a time of crisis? Accounting and finance, of course, are fundamental.

“You have to know the full revenue cycle cradle to grave,” Scott says, adding that strong management is also a key trait.

There are other things, though, that are particularly important for a chief financial officer in financially distressed situations.

Internal Communication

When managing a company’s finance team, the interim CFO must be able to communicate their plan of action. Since they’re typically in the role for around six months, they don’t have as much time to win trust and build unity.

Focusing the early days on getting to know the team helps with buy-in for the duration of the project. One component of this is alleviating fears of the unknown.

“The first day, I think, is talking to as many people as possible in the company, on the finance team, and reassuring them that things are going to get better,” says one long-time interim CFO from our network of experts.

A temporary finance executive must also be able to communicate with his or her peers and superiors. Not only do they sit in the C-suite, but they may be a direct line to a private equity firm that has a lot at stake.

“They have to be able to build credibility going both directions quickly if they’re going to get anything done,” Scott says.

External Communication

Beyond providing clarity for coworkers, a chief financial officer must also be skilled at working with clients, creditors, vendors and other outside entities.

If a company is in danger of filing for bankruptcy, the interim CFO will likely negotiate with creditors to lower their debts.

They may also ask clients to move up their timeline for accounts receivable so the organization can have more cash sooner.

In either case, being able to work well with others is paramount.

“The situations where financial executives most often fail to reach an agreement are when they don’t have any people skills, or they don’t truly want a result,” Scott says. “You have to be able to bend and give a little bit on some of these things just like in any negotiation.”

Access Interim CFO Resources

Crisis Exit Strategy – Prep for Sale

Before taking a company’s financial reins in the midst of a crisis, an interim CFO should understand if the firm is planning an exit, and if so, what the strategy is. That allows the company to get the maximum benefit out of its new executive resource.

“Bringing in somebody from the outside allows you to access a broader set of skills and brings a fresh perspective,” BluWave managing director Houston Slatton says.

Here are some differences between prepping to sell the entire company vs. just a few assets.

Sell the Entity

If someone is brought on to prep for the sale of an entire company, their job is to get it in the best shape possible for the buyer.

Not only will this make it a more attractive purchase, but the seller will extract more value, too. This process should be planned for months, if not years in advance, when possible.

The interim chief finance officer brought on in this situation should have experience improving operations, cutting costs, increasing accountability and more. They should also be well-versed in evaluating and working with potential buyers and closing the transaction.

CASE STUDY: Interim CFO Elevates Real Estate Search Engine’s Financial Strategy

Sell the Assets

Even when parts of a company are being sold, as opposed to the entire organization, many of the same skills apply.

In this scenario, though, the company remains intact, and employees are not typically part of the package.

The right executive will help an organization receive a large return for those assets, boosting cash flow.

Each interim CFO in the BluWave network has been vetted and reference-checked before we ever put them on our roster.

That way, when companies in financial distress reach out, we can provide two or three exact-fit solutions in less than one business day. Whether your company is in the nation’s capital, Atlanta, our hometown of Music City, or any other major city, we have the resources you need.

This attention to detail and our private-equity speed turnaround give organizations a greater chance of getting back on track financially.

Learn more about the select group of private equity-grade interim CFOs we work with daily.

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September 2022 Roundup: BluWave Client Insights

October 4, 2022 Brad Gerick

BluWave works with over 500 PE firms from around the globe as well as their portfolio companies and proactive independent companies, connecting them with BluWave-vetted, best-in-class, third-party service providers across a variety of resource and functional areas. From information technology and manufacturing to healthcare, consumer goods, and beyond, our clients are expert business builders. In other words, they have their heads in the game and their hands on the pulse of news and insights you can use.

Check out the latest, curated collection of our client’s musings on employee-based ownership, developing ICPs, creating an employer brand, and more.

KKR: Employee Ownership

Seeing success after implementing broad-based employee ownership programs in several portfolio companies, Pete Stavros, Co-Head of Americas Private Equity at KKR, shares his insights on the benefits of employee ownership.

ParkerGale: Developing ICPs

ParkerGale operating partners Cici Zhang and Paul Stansik speak on the importance of defining an Ideal Customer Profile (ICP) and discuss their steps to building out an ICP.

Listen to Podcast>>>

Insight Partners: Building an Employer Brand

With an increasing emphasis on talent and a push towards putting employees first, it is critical for employers to proactively work to attract and retain top talent. Insight Partner’s Talent COE, Hattie Young, identifies a 4-step process for building a compelling employer brand to attract the best talent.

Montage Partners: Questions Sellers Should Ask

The diligence process should be a two-way street. Montage Partners highlights diligence on the sell side and provides questions sellers should be asking potential buyers.

Blackstone: Dealing with a Tough Market

With recession risks in the US and global economy, Joe Zidle of Blackstone gives his insights to dealing with a tough market, speaking to inflation, a strengthening labor market, and shifting consumer demand.

Read what some of our clients had to say last month on value creation through human capital, continued recessionary pressures, DEI, digital marketing, and more.