Preparing for Sale Archives

How and Why to Hire an Interim CFO: Key Benefits

July 18, 2024 Brad Gerick

Identifying an interim chief financial officer can be tedious, if not expensive. Companies that don’t know what they’re looking for when they begin their search could spend large sums of money on headhunters and recruiting firms.

They can also lose valuable time interviewing unqualified candidates.

When hiring an interim CFO instead of a permanent replacement, key considerations include timeline, need-specific criteria and keeping an eye out for red flags.

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As a trusted resource for hundreds of private equity firms and thousands of portfolio and independent companies, BluWave has exclusive insight into what makes a home-run selection vs. someone who will send you back to the drawing board.

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What is an Interim CFO?

An interim chief financial officer is a temporary, full-time executive a company hires when it’s without a full-time CFO. We’ll talk more later about the situations in which you would hire a temporary CFO.

To better “define interim CFO,” we asked BluWave’s Vice President of Finance and Accounting Justin Scott.

“I think the interim CFO role really depends because it’s really got to be scoped well going into it because you could have an interim for different reasons,” Scott says of defining the role. “If you’re going to take the interim route, you want make sure that you have an interim that has the specific skillset you need for the reason you need an interim.”

READ MORE: How the BluWave Process Works

Why Hire an Interim CFO?

When it comes to interim management, finding the right interim CFO is important for your company’s financial operations to run smoothly during periods of transition. Whether you’re a small business seeking immediate support or a growing company requiring specialized financial expertise, the decision to hire an interim CFO while searching for a permanent candidate can provide a range of benefits.

“What we’ve heard is, you’re either finding a full-time person in less than 30 days in the first slate of candidates or it’s going to take five or six months,” BluWave managing director Houston Slatton says.

Identifying a candidate experienced with the right industry, company size and revenue models, for example, takes time.

“You may get lucky, but you’re probably not going to. And so you need to plan to not have a full-time person in that seat for five or six months,” Slatton adds. “You don’t want a B-minus player because they’re going to be a key member of the executive team.”

There are several situations in which you might look for an interim CFO.

“You could have an interim CFO simply as a stopgap. You lost your prior CFO unplanned for whatever reason. And ‘I just I got to fill a role until I find my long-term solution,’ or I could have an interim CFO to prep for sale,” Scott says. “So it really depends on the scope of the interim CFO.”

Many businesses turn to interim CFO services and fractional CFO services to bring in experienced professionals on an interim basis. Here are some of the more common scenarios where interim CFOs are hired.

Trial Basis

One benefit of a short-term hire is that you can test them in the role before making a full-time commitment. This makes it easier to transition a strong candidate to full-time if they prove to be a good fit. It also means giving someone an opportunity without immediately making a larger investment.

“It is very easy to interview very well and then the person who shows up is not who you interviewed,” Scott says. “That’s very critical in the CFO role because if you get a bad CFO or somebody that can talk the lingo but not deliver the activity, you can get yourself in a lot of trouble real fast.”

Interim-to-full-time transitions often happen after a company’s been recently acquired. What began as a one- or two-quarter stint can easily transition to a permanent role if the person has integrated well, especially with the CEO.

Stopgap

Sometimes, companies need more time before choosing a permanent CFO. But they don’t want to leave such a crucial role vacant for months, either.

This is another opportunity to bring in someone with interim experience to bridge the gap between the prior CFO and your long-term solution. Hiring a part-time CFO, virtual CFO, or even an outsourced CFO helps companies navigate complex financial challenges while waiting for a full-time CFO position to be filled in.

“Given the importance of the CFO role, it’s really hard to be without one unless you have an amazing controller,” Slatton says.

Some people make a career out of temporary assignments, putting them top-of-mind for recruiters in these situations. One such person in our network talked to us about the benefits of an interim CFO.

“I think the primary purpose is to just stabilize everything,” says the executive, who spent eight years in PE before focusing on temporary assignments. “But then also learn the nature of the operations and the backbone of the company, and how it operates and if changes need to be made.”

At BluWave, we have seen that the end of the year is a popular time to hire an interim CFO.

Historically, about 60 percent of the interim CFO projects we have sourced were in Q3 and Q4.

“The last thing a CEO wants to do is be approaching an end-of-fiscal-year and not have somebody that’s going to drive their financial close right for the year,” Scott says. “That could be a really scary place to be, where earlier in the year you’ve got time to bounce back.”

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Post-Acquisition Value Creation

Interim CFOs also focus on making a company as valuable as possible once it’s been acquired. This is especially important if someone in a lower-level position, such as a controller or an accountant, previously led finances.

“One purpose of an interim CFO is to just stabilize everything,” says Hunter Eagan*, an interim CFO from BluWave’s invite-only network. “But then also learn the nature of the operations and the backbone of the company, and how it operates and figure out whether it’s going to meet the demands of the new private equity owners, or if changes need to be made so that the company can produce the information that the private equity owners are going to want to see.”

Slatton says companies often use large amounts of debt to finance their purchases, opening the door to new accounting situations.

“Now they need somebody to handle all the bank reporting and covenant testing for the lenders and putting in real GAAP,” Slatton says. “As soon as they have a loan like that, they suddenly have to do all this financial reporting. That will be a new process and it hits quickly after they close on the business.”

In addition to what Slatton shares, other key value-creation tasks may include:

Developing strategic plans
Building up the finance team
Financial restructuring
Establishing KPIs
Performing audits
Forecasting
Cost management
Transaction processing
Closing the books
ERP implementations

Prep for Sale

A short-term finance executive can also be a great resource when a company is preparing to be sold. After holding a company for 3 to 5 years, PE firms typically look to sell it to a larger PE firm or public company.

Merger and acquisition experience is especially important in private equity, whether it be post-merger integration or prep for sale, having M&A experience is key.

Here are some other ways interim CFOs can help companies prep for sale:

Performing legal and external reporting to regulators
Management reporting to internal stakeholders
Prepping the data room
Responding to diligence requests

Hire an Industry-Specific Interim CFO

What Types of Companies Do Interim CFOs Work In?

Any company that needs a temporary finance leader or financial expert at the C-suite level can use an interim CFO.

Private equity firms often want to find temporary finance leaders before, during or after the sale of a portfolio company.

But private and public companies can also benefit from strong finance and accounting leadership.

At BluWave, this is one of our most in-demand roles year-round as companies seek to professionalize their finance function, ease a transition, recover from a crisis and more.

Interim Chief Financial Officer Recruitment Criteria

When evaluating CFO candidates, use the same measuring stick for each one. BluWave founder and CEO Sean Mooney, who has more than 20 years of PE experience, came up with the PE-grade CFO scorecard for this purpose when looking for full-time CFOs.

Many of the same principles can be applied to the interim CFO executive search process. Having a baseline allows everyone involved to make more objective evaluations.

“Assign different parts of your scorecard to relevant key team members so you can systematically measure candidates against each of your criteria while getting a range of inputs from across your organization,” Mooney explains on the Karma School of Business podcast.

When sourcing candidates or interim executives, companies often reach out to someone like BluWave for help. We then present them two or three candidates tailored to their specific needs. One of those candidates typically emerges as the leading choice, at which point they’ll continue interviewing with other executives and, when applicable, the PE firm.

While you can put whatever criteria you like on your scorecard, we have a few recommendations for the interim leader process.

Company Size

Experience at a larger company vs. a smaller one isn’t good or bad, it’s just different.

We often see, for example, executives who traditionally spend time at larger organizations struggle to move to smaller ones.

“CFOs that come out of those portfolio companies or come up through the ranks have a very different mindset than one that comes up through the Fortune 500 world,” Scott says. “It’s a little bit more of the rolling up the sleeves type thing, right? The PE-grade CFOs, that’s just expected because you have to be engaged in everything because instead of having 500 people on your finance and accounting team, you might only have two to five.”

Mooney recalls multiple past appointments that didn’t work out for that reason.

“I’ve had so many failures trying to bring in big-name large company CFOs who just couldn’t function at a lower middle market size company,” he says. “It wasn’t that they weren’t great. It was that they just weren’t a good fit for a smaller-company environment.”

Relevant Industry Experience

This is an important factor for companies with unique or complex accounting needs or ones within highly regulated industries.

A strong candidate should be able to articulate relevant industry experience in the interview process. Whether manufacturing, software, healthcare, or another area, the interim CFO should be entering familiar territory from day one.

To evaluate this point, Scott says we ask candidates: “What did you do in that industry to make yourself stand out or to prove that you understand that industry and how it works?”

Capital Structures

Mooney says interactions with lenders and investors go more smoothly when someone has experience operating under similar capital structures.

“This is particularly true when we think about having done the balance sheet entering a public company operating environment,” he says.

CASE STUDY: Interim CFO Urgently Needed For Prep For Sale Process

Internal vs. External

While uncommon, there are times when the ideal interim CFO is already on your team.

“It’s going to be a more seamless transition with somebody that comes internally,” Slatton says. “If you have somebody really good that you like that’s internal, use them just because it’s going to be easier.”

More often, though, companies bring in someone new.

“Some of those higher-level kind of CFO skills, you’re not going to find on an internal team,” Slatton says. “Bringing in somebody from the outside allows you to have access to a broader set of skills and brings a fresh perspective.”

Welsh agrees, saying it can be easier for interim CFOs to put their emotions aside and get the job done.

“They can just pick out the issues and deal with it,” she says.

Hire an Industry-Specific Interim CFO

How Long is an Interim CFO Assignment

Interim CFO assignments, by nature, are temporary. Interim finance roles typically last around six months, though we have seen stints as short as three months and as long as a year or more. It all depends on the situation a particular business is facing.

“Oftentimes it’s until you find the permanent and that often takes three to six months,” Slatton says. “Recently it’s been longer, just as it’s been harder to find talent across the board.”

As Slatton mentions, at the end of the temporary CFO’s time, a full-time CFO is named. Oftentimes there’s a transition process where the eventual full-time candidate works alongside the interim to ensure a smooth transition. In the same cases, the interim CFO is hired into the same position full-time.

Hire an Interim CFO Immediately

A well-vetted interim CFO search process typically takes up to 90 days from the initial call to their first day of work.

There are times, however, when you need a vacancy filled “yesterday.” At BluWave, we provide two or three best-fit candidates within a single business day. This can cut a process that normally takes three months to a few days.

“Of the several hundred PE-grade CFOs in our network, we select the top two or three choices for a company, and once the negotiation is finalized, they can get to work very fast,” Scott says.

Every candidate in the BluWave network has been pre-vetted with multiple references. And before we recommend someone to a company, they are vetted again to provide the most up-to-date evaluation possible.

CASE STUDY: Interim CFO Crucially Needed for Portco Carveout

Candidate Red Flags

As we already mentioned, many candidates can talk the talk, but not walk the walk.

Here are some signals that will help you discount the duds from the outset.

Salary Disparity

If someone is accustomed to making significantly more money than you can pay, you might want to skip them. While they may claim to be interested, they could use the interim opportunity as a stepping stone to a higher-paying role, leaving you looking for another finance executive sooner than expected.

“In my experience, rarely will the candidate take a meaningful discount and not start looking for the best next role sooner than later,” Mooney says. “You don’t want to be a bridge to somewhere else.”

Geography

Another important consideration is location. Or in some cases, relocation.

While the pandemic accustomed companies to remote workforces, there’s value in having your financial leader on-site, even for a few days a week.

In high-stress situations like turnarounds, restructurings or building a finance team from scratch, interim CFOs need to earn trust as fast as possible. This is difficult to achieve working remotely.

“Time and time again we’ve seen projects get down to the finish line and at the end of the day, they say, ‘Well I’m not really ready,’ or ‘We’re not going to move our family,’” Mooney added.

If you’re considering someone who’s out-of-market, confirm early on that they’re willing to work from your office for the majority of the assignment if this is important to you.

More Interim CFO Resources

Short Stints

While less of a concern for temporary assignments, beware of candidates who routinely spent only a year or two in full-time roles.

The exception would be someone like our interim CFO veteran, who spent years in full-time roles before shifting exclusively to short-term stints. Candidates like him understand how to make the most out of a three- to six-month opportunity.

“I think it’s very valuable to have someone who knows all the things that need to get done,” he says. “Getting everything set up, and then making sure that the management team and the private equity owners have a good open line of communication, and aren’t afraid of one another. I think an interim CFO is in the perfect spot to facilitate that communication.”

Employment Gaps

Mooney says it’s normal for candidates to have “bumps in the road.” No one’s career is a downhill ride on the yellow-brick road. Hiccups should be the exception, though, and not the rule.

“Be aware of large gaps in employment. Look for track records of being recruited to bigger and better next roles versus leaving roles without a bird in hand,” he says.

If a candidate consistently left full-time jobs without having the next one lined up, dig deeper into why that is, or discount them altogether.

Pointing Fingers

Talk to each man and woman you interview about difficult times in their careers.

If they’re quick to pass the blame, you can expect them to act likewise once hired. You want someone who takes responsibility, not assigns it.

“Look for candidates to own the results and ultimately share what they did to take action and improve the situation,” Mooney says. “Be aware of candidates who repeatedly blame circumstance and fate.”

Questionable References

BluWave runs multiple reference calls before presenting a candidate to a potential client. Welsh says this is a great way to weed out unqualified options.

“It’s a value prop that we have for our clients,” she says. “We always ask for references, and if they’re unwilling to send them, we take that as a red flag and we are unwilling to work with them from there.”

Passive Work Habits

If a candidate doesn’t have a history of getting involved in the day-to-day details, they’re probably not going to accomplish much in a three– to six–month assignment.

“People aren’t looking for an interim executive to come in and bark orders. Anybody can do that,” Scott says. “They’re looking for somebody to come in and really get engaged, understand what’s going on in the business, figure out what’s not working in the finance and accounting department and get that aligned with the business needs as quickly as possible. And you can’t do that sitting back.”

That’s why a candidate needs to express past accomplishments with details.

Bad Cultural Fit

“Every CFO that we’re going to present is qualified,” Slatton says. “It’s more about, can they fit well with the organization and are they going to partner well with the PE firm?”

Welsh agrees, saying there are many qualified finance executives for hire. The more important question, though, is how well they can adapt to a new situation.

“If they can’t earn respect and get people on board with the company mission, they’re not going to be able to move the company in a positive direction,” she says. “You can be the most experienced executive in the world. But ultimately, if you butt heads with the person you’re supposed to be working with, it’s not going to work out.”

Hire PE-Grade Interim CFOs

Lack of Experience

Welsh, who onboards interim CFOs to the BluWave network, says lesser-known candidates can embellish their background to land a prized opportunity.

That’s why, she says, we ask probing questions before recommending them to a client: “Who have you worked with? When have you worked with them? And how have you worked with them? I think those are very important.”

When candidates see interim opportunities as a chance to build their skillset, it’s a recipe for disaster.

“An interim CFO job probably isn’t the way to learn new types of business models, because interim CFOs need to jump in and know what they’re doing,” Slatton says. “Don’t try to think of an interim opportunity as a stretch opportunity.”

Selecting the right interim executive can be difficult, but with the right evaluation process and support, you’re more likely to hire the best person much faster.

Mooney recently recommended in CFO Magazine eight ways to optimize the process.

Creating an interim CFO scorecard can be a great way to kick off your search process, but don’t hesitate to contact us for help.

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“Don’t overly weigh your assessment on any one criteria,” Mooney adds. “When using a structured scorecard-based approach that includes a comprehensive assessment of a candidate’s competencies, skills, values, intellect, personality and real-life case-study testing, I think you’re going to find that your success rates are going to go way up.”

*Privacy is important to us. While the source and company name have been changed, these are real quotations from a real service provider in the BluWave Business Builders’ Network.

Common Mistakes to Avoid When Preparing A Company for Sale

July 17, 2021 Sean Mooney

After a nearly 20-year career in private equity, I’ve learned to appreciate that it takes just as much work to effectively sell a company as it does to excellently buy a company. It’s also easy to slip up or not pay enough attention to vital steps that could profoundly change the final price upon sale.

Sellers make a number of common mistakes during sale processes, including a lack of advance preparation, not knowing key questions about themselves, and not appropriately resourcing the business to concurrently run operations and support a sale process. Each of these mistakes causes sellers to lose credibility and slow down their process, which, in turn, increases real and perceived risk, and inevitably kills value.

To help get better outcomes, here are the three most common mistakes we see made when selling your business and how to fix them:

Lack of Preparation

As a private equity investor, we made it our business to optimize the sale process. We would talk virtually every month about the right time to sell various businesses. When we finally decided it was the right time to sell, we, of course, wanted to be in the market within six weeks of our decision. Even with professional sellers of businesses like PE investors, this decision is often followed by all sorts of scrambling by investors, portfolio company teams, investment bankers, lawyers, and related support professionals to get ready for sale. For family-held or entrepreneurially-held businesses with fewer resources and less experience selling companies, this process is multiple times more chaotic.

Don’t try to squeeze months of work into six weeks: preparing for sale should start well in advance of the sale process. Taking some time in advance will enable you to run an aggressive process while also effectively running your business at the same time.

We recently held a management forum for a top private equity find and their managers, during which we discussed best practices for planning for sale. The key takeaway was preparing for sale should start years in advance, ideally the day the first wire from investors clears, so you can hit the market at any moment when the time is right.

Not knowing yourself before you’re asked

Time and time again on the buyside, I’ve asked fundamental questions that should have been known by the sellers, but weren’t. When we asked these questions, the process had to slow down as their team hustled to find the answers. These slow-downs give everyone in the process time to rethink assumptions and value.

Make sure you know the following key items before you start an M&A process because you’ll most likely be asked these right at the time you can least afford to pause your process:

The size and growth rate of your direct markets
Your company’s market share in their addressable markets and how it compares to competitors
Volume, revenue, and profitability by customer and product over a trailing 3-year period

Once you know these elements, incorporate them into a detailed financial model that projects your performance over the next five years (make sure you also have monthly projections for the next two years). If you do this, you’ll build credibility with buyers and disarm much of the skepticism that naturally occurs during sales processes.

Also, try your best to predict what buyers will be asking during the sale process. Have open conversations with your investors, executives, and investment bankers to understand your strengths and weaknesses. Save yourself from having to scramble to produce appropriate reports and information in the heat of the sale process. Having a general idea of what buyers are looking for and preemptively having answers to those questions, disseminating the information to those who need to know, and confirming overall readiness will ensure that buyers feel confident and comfortable when meeting with you and your team.

Truly best-in-class companies bring in third parties to pre-opine on the state and opportunities of the business. Spend a little money on pre-due diligence, including sell-side quality of earnings reports, tax diligence, market studies, and IT. The cost is minor as it compares the value of the company, and these third-party stamps of approval from credible advisors will give your buyers confidence that the company is what it is and not see (or go looking for) ghosts during the sprint to the finish line.

Under-Resourcing with Interim Staff

The single biggest mistake I saw time and again during my private equity career was understaffing the sale process. It’s nearly impossible to both aggressively run a sale process and proactively run your company.

Most sellers’ intuition is to put the bulk of the workload on their investment bankers’ shoulders. Your investment bankers can help, but you are not paying them to be your accountants, lawyers, market strategists, and data entry specialists. You hire top investment bankers to intimately know the buyers, appropriately frame the opportunity, and manage a process to optimize valuations. Don’t distract them by getting them bogged down in the weeds. Let them focus on the job you hired them for and they’ll deliver outstanding results.

Every business undergoing a sale process should bring in some level of interim staff (ranging from interim controllers to interim CFOs) to either help with the production of analyses and data requests or help manage day-to-day operations. This is a relatively small expense compared to the sums that will be gained by running a fast and credible process. If you don’t resource appropriately, something usually has to give: either your sale process, your operating results, or both.

We work daily to help top private equity firms, and their portfolio companies and proactively-managed independent companies more effectively assess opportunities and build value. It’s hard to know who is good: we make it our business to be the expert of experts.

Find out how we can help you during due diligence, value creation, or the sale process!

Top 8 Best Practices for Preparing for a Value Maximizing Sale

June 11, 2021 Sean Mooney

In today’s competitive markets, private equity companies and their partners are being forced to pay record-high prices for investments in companies. To generate attractive returns, the private equity companies and their managers must create substantial value after closing. One effective way to create value is by running a highly prepared, efficient, and focused sales process. Here are eight best practices for preparing a company for a value-maximizing sale:

Run fast
Time is the enemy of any business sale process. It gives interested buyers the opportunity to overthink diligence items, get bogged down in excessive analysis, and find reasons why they shouldn’t pay the most full and fair market price.

It also extends the opportunities for customers, suppliers, and competitors to discover that your company is in a sales process, which can lead to myriad distractions and unforeseen consequences. From the day your investment banker sends out teasers and a confidentiality agreement, your goal should be to sprint to the finish line.

Perform diligence on yourself
One of the biggest things that can bog down a sales process is when interested parties discover aspects of the business that are different than those represented in offering materials. Not only does this slow the process down, but it also gives counterparties the opportunity to re-negotiate price and terms, often late in the process when the seller’s relative power in the process can diminish.

To avoid this, it is well worth the time and money to do diligence on yourself. Hiring quality of earnings advisors, tax advisors, and even market sizing, competitive landscaping, and IT consultants to do pre-diligence will give you much more confidence going into a process that you won’t encounter a surprise that could impact time and value. Additionally, many of these pre-diligence service providers will enable you to share their findings with interested parties, which will ultimately help you run an even faster and more certain process.

Be prepared to answer key questions
Almost all interested buyers will want to know (i) revenue and gross profit by customer and product over time, and (ii) detailed statistics regarding the size of your addressable market and your related market share. It will be to your benefit to stay prepared with these detailed answers before you start a business sale process.

If you’re not prepared, it is likely that buyers will insist that you take the time to prepare such detailed analyses. Taking the time to do them in the middle of a process is often very distracting, stresses internal resources, and slows down processes at the exact time you don’t want to be slowing down.

Organize your files
Interested buyers are not going to part with substantial sums of money to buy your business without doing comprehensive due diligence. This includes very detailed reviews of nearly every financial report and contract that is relevant to your ownership period (and likely even beyond your ownership period). Take the time in advance to organize all your contracts and financial report and summarize the key terms of all meaningful contracts. Your sponsors, investment bankers, and attorneys will give you guidance on where to focus your attention.

Hire high-quality investment bankers
Investment bankers are experts at maximizing value in the marketplace. The best investment bankers not only know how to pitch an indicative valuation and run a broad process, but also have pre-established relationships with the relevant buyers for companies like yours and an understanding of how your company could or should fit into the strategies of the most likely buyers. Hiring the right investment bankers almost always pays for itself.

Hire high-quality attorneys
Just like investment bankers, hiring the right attorney can add significant value to your sale process. It is more than likely that your buyer will have a highly capable attorney that solely focuses on mergers and acquisitions transactions.

You should also have a highly capable attorney who can adeptly negotiate prevailing market terms and efficiently and effectively protect your interests from liabilities that survive after the initial closing. A good attorney should also know what’s important and not try to win every point in your favor. An M&A transaction involves a lot of give and take. The best attorneys know that intelligent compromise is needed to close a deal.

Polish your presentation
Interested buyers aren’t just buying a company; they are buying the management team. It is imperative to have strong contributions from each of the key members of the management team. Presenting canned PowerPoint presentations, however, is not necessarily the day job of your functional area leaders. Practice, practice, and more practice is critical.

Private equity sponsors and investment bankers also serve as great sounding boards and fountains of feedback and advice as they participate in these types of meetings on a regular basis. There are also professional management meeting presentation advisors that can add tremendous value by giving arms-length feedback and advice free of natural bias that occurs with your existing relationships. We know some really good, PE-tested presentation coaches if you need this type of resource.

Staff up
Preparing for and managing a business sale process is an unbelievable amount of work. Your company is not staffed to manage this level of surge demand. Most of the workload typically falls on the finance staff. Hiring interim staffing to support this surge demand is tremendously valuable in terms of making sure that information requests are met in a timely manner and your company continues to run as well as possible during a trying time.

Moreover, the costs of these interim support personnel are relatively minor as it relates to the total transaction value and can typically be allocated as transaction-related add-backs and closing expenses. BluWave has this world mapped and can quickly pair you with the right group or person to support your finance staff during this critical time.

After working feverishly for years on building and growing your company, the sale process is your final opportunity to monetize the full value of your company for the benefit of you, your team, and your investors. Take every opportunity to prepare in advance, bring in strong advisors and business support resources, and run a fast, competitive sales process so you can optimize the outcome of a rarely-occurring cornerstone event.

Private Equity Interview with LaSalle Capital partner & COO Kelly Cornelis

May 11, 2021 Sean Mooney

As the daughter of a retired sportscaster, Kelly Cornelis had little knowledge of the finance world growing up on the outskirts of Chicago. She entered college at Notre Dame as an English major and stayed there until her sophomore year—when one of her professors noticed her proclivity for math and suggested she enroll in some business courses. “I was immediately drawn to the analytical aspects of finance,” she recalls. This led her to an investment management class, where she had the opportunity to manage money from the college endowment and was given 200k to track stocks and invest on their behalf. The rest, as the saying goes, was history.

Today, she serves as a Partner and Chief Operating Officer for Lasalle Capital, where she is responsible for deal sourcing and execution, financial operations, portfolio management, and investor relations. Kelly is also a founding member of Chicago Women in Private Equity, is a member of WAVE and PE WIN (Private Equity Women’s Investor Network) and served as a Board Member of MBBI (Midwest Business Brokers and Intermediaries) and ACG Chicago. In 2018, she was named one of mid-market M&A’s “Most Influential Women” by Mergers & Acquisitions magazine.

I had the pleasure of sitting down with Kelly and picking her brain about appointing female CEOs, how to create value, and how to embrace change in all its various forms.

Sean Mooney: What are some investments you are most excited about at LaSalle Capital?

Kelly Cornelis: We are primarily focused on the food and beverage sector, and we are seeing a tremendous amount of innovation, particularly in the middle to smaller markets. Because we invest in mostly small businesses, family-owned operations, or entrepreneurs, it’s exciting to partner with these founders and support them as they grow—despite a tumultuous 2020.

One example is our portfolio company, Fresh Origins, the leading grower of microgreens and edible flowers in the U.S. It was founded over 30 years ago by a solo entrepreneur—he basically invented the category. He started with one greenhouse, and now we have over 30 greenhouses and over two million square feet of space in San Diego, California. Recently, we promoted his right-hand person to CEO, and she is steering the company toward rapid growth, given her vast experience and deep understanding of the niche industry landscape.

SM: The PE industry speaks generally about “value creation” continually. What does this mean to you, specifically?

KC: We look at this in a variety of ways, but we mostly focus on revenue, EBITA growth, and margin enhancement (implementing production efficiencies). We also try to assess the strength of the management team; then we spend time adding the right-fit experts and people to finance, operations, sales, and other areas of importance. Although this isn’t directly related to numbers, it comes through in the numbers. Simply put, strong teams made up of the right people are what enable value creation.

SM: 2020 was quite a year for the food and beverage sector. What were some positive results of the shifting pandemic world in terms of this industry?

KC: Our portfolio companies were extremely impacted by covid-19, as you can imagine, and as a result, we implemented crisis management tactics and protocols at many of our food businesses—which were broadly recognized as essential businesses. Three of our companies are in manufacturing, and they sell to restaurants, so after the initial shock of March 2020, we adjusted by reducing headcount (unfortunately), implementing safety procedures, while simultaneously increasing wages for employees putting themselves at risk. We even had one of our portfolio company CEOs working the production line because we had several people out sick. But many positive things came out of the pandemic as well. We became more efficient and also entered new sales channels. All of the companies are now performing extremely well and almost back to pre-COVID sales; and I think many of the changes we have seen in consumer behavior such as grocery delivery, take-out, and meal kits and increased focus on healthier eating will stick.

SM: How do you leverage interim executives and experts to create value within your portfolio companies? What resource areas are most “in demand” right now?

KC: We use interim executives for various reasons: if someone leaves unexpectedly, or need specific project expertise for ERP systems. We often bring in interim CFOs before we exit a business because we need extra help with the sale process. As far as experts in demand, covid-19 has created opportunities for new channels and new products. Using Fresh Origins again as the example, we are going into the retail channel, so we are looking for experienced sales executives and expert resources to help us take advantage of this opportunity.

SM: Above all else, what is the one quality you always look for in a leader—whether short-term project hire or long-term for company growth?

KC: We have seen different styles work in different situations, and not all leaders are cut from the same cloth. But the ability to problem solve is the key; being able to create solutions that move quickly and not get sidetracked or bogged down by every little obstacle that arises.

SM: Any advice for striking that elusive work/life balance, particularly in our increasingly virtual and 24/7 world?

KC: Being on devices all day is draining, compared to pre-pandemic when you were meeting someone in person for lunch or coffee. I’ve been trying to take technology breaks throughout the day—go for a walk or read a physical book. I don’t think we realize the impact this is having on our mental and physical health. As we move into the “new normal” we need to retain some balance and not let ourselves get sucked into our desks, our computers, and our phones.

SM: In one sentence, what was the biggest, unexpected change in 2020 that you are embracing in 2021?

KC: Being less scheduled, not attending kids’ birthday parties [laughs], and not commuting.

Elements of Value Scorecard Revealed

March 24, 2021 Kyle Johnson

What makes a what are the elements of value for a company?

Its people? Definitely.

Its products? Absolutely.

Its patents? Very likely.

But these are the obvious, high-level answers for anyone with a rudimentary understanding of how business (and the economy) works. But it’s the more nuanced elements of value that can make or break a company, particularly during vulnerable times—like an economic downturn or a barrage of new market entrants.

Whether your company is investor-backed, customer-supported, or a combination of both, investors have a significant amount of knowledge about the core elements of value for any business beyond the usual suspects. In part, this is because they are in the “business of growth”—and growth only happens when the products and services being sold have value and can hold value in their specific market.

In a recent CEOWORLD Magazine article, our founder and CEO Sean Mooney offered eight core elements of value that any company can benefit from when prioritized, based on his 20-plus years of experience in private equity. How does your company measure up?

Based on his experience, both from the investor and company founder side, he notes: “By taking the perspective of outside investors, business leaders will identify more opportunities, reduce the risk profile of their company, and drive accelerated value creation over time.”

Check out the full article in CEOWORLD Magazine for details on each core element of value.