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.
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.
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.”
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Industry-focused firm with union experience to conduct market research, headhunt C-suite executives for portco
Service Area: Commercial Due Diligence: Market Study and Recruiting
Client Type: Mid-Market Private Equity Firm
Service Provider Type: PE-focused Diligence Advisory Firm
Industry: Construction and Engineering: HVAC & Plumbing
The Challenge
Prep for sale and build a corporate office team from scratch
The PE firm needed an HVAC-experienced market research firm to help with a pair of high-priority projects. With an eye on exiting soon, the firm wanted someone in the same region as their portco – the southeast U.S. – to talk to union reps, customers, facility managers, trade organization leaders and OEMs.
They were also looking to hire a CEO, CFO and Chief Labor Relations officer to build a corporate office from scratch.
How BluWave Helped
Introduced best-in-class service providers
With just a two-week timeline, we immediately presented a pair of BluWave-grade service providers with HVAC union experience. The client chose its preferred option and was introduced on a call the next business day.
The Result
Service provider sets up private equity firm for successful exit five months after introduction
The client engaged with the service provider, who completed the market study and helped them fill their executive roles. Five months later, the firm sold its portco to a large-cap PE firm after a five-year hold period.
The portco had a 400 percent revenue and EBITDA increase during the holding period, and integrated six different acquisitions in its exit year while working with a BluWave service provider.
We recommend the service provider for anything in the built environment. The team was great. Everything was great. They clearly knew the space. I’d use them again.
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.
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.
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.
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.”
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.”
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:
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.”
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.
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.
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.
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.
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.
Every quarter our team analyzes the projects we work on with our 500+ PE firm clients to get a birdseye view of the market. We recently compiled our Q4 findings, as well as annual 2022 findings, into our Q4 2022 BluWave Insights Report. Request your copy.
Key findings from 2022 include:
Annual value creation activity increased ~14% YoY.
Human capital remains PE’s primary area of focus at 50% of all 2022 value creation activity.
Strategy resource usage in 2022 diligence activity increased from 43% in 2021 to 46% in 2022.
Learn more about the insights we gleaned from Q4 and 2022:
BluWave serves a trusted role with hundreds of the world’s leading private equity firms and thousands of proactive businesses by connecting them with the best-in-class third parties to help build value with speed and certainty. With the conclusion of 2022 and the inception of the new year, we’ve gathered insights from our unique vantage in the private equity landscape. From our proprietary data, we are able to glean insights into how and why the best business builders in the world are assessing opportunities and building value in their portfolio companies. Here are some of the top takeaways from the BluWave Activity Index from Q1-Q4 2022.
The common theme throughout the entirety of 2022 is that business builders were focused on creating value in their companies. In the BluWave Value Creation Index, activity related to value creation was up to 72% by year-end – a more than 14% increase from 2021. Furthermore, Human Capital is surging to historically high numbers. The BluWave Activity Index shows that 50% of all value creation activity was invested in human capital for the year, and 54% in Q4.
On the due diligence side, deal flow was down in 2022. The BluWave Value Creation Index shows private equity activity related to diligence was down to 28% for the year. Within the diligence activity that we did see, we saw firms focus heavily on strategy initiatives – accounting for 46% of all diligence activity, up from 43% in 2021. In 2022, PE firms perceived the cost of misreading the market to be high in an uncertain economy, so they brought in strategic resources to help.
BluWave is pleased to work with some of the best business builders in the world every year. We hope the insights from our 2022 BluWave Insights Report will help you close deals with certainty, create differential value in your companies, and prepare for a confident exit. If you’d like to learn more and get the full report, please contact any member of the BluWave team or follow the link below.
Recently, BluWave founder & CEO, Sean Mooney, spoke with Lou Diamond on his Thrive LouD podcast. Their conversation covered Sean’s story, how he got into private equity, how he transitioned into founding BluWave, what BluWave does, and much more.
Interested in listening to the full episode to learn how BluWave now supports the best business builders in the world? Click below.
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.
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.”
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.
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.
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.”
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.
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.
Every quarter we gather human capital professionals from private equity firms to discuss current industry topics and to offer peers the chance to gather, share information, and decompress with one another. In our most recent event, we gathered to discuss top trends in 2022 and top areas of focus for 2023.
These forums are for human capital professionals at private equity firms only and follow Chatham House Rules, so listed below are high-level takeaways only. If you are a human capital professional in private equity and interested in joining fellow human capital professionals at our next PE Human Capital Forum, RSVP here.
Top Trends in 2022
Human capital professionals in PE are playing a wide variety of roles within PE firms and for portfolio companies:
The dynamic economy and labor market resulted in constantly shifting priorities throughout the year which has led to human capital professionals having to lead varying initiatives from retention & recruiting to organizational design.
Recruiting and retention:
Certain sectors are experiencing higher turnover than others and HR leaders have been charged with identifying root causes for turnover and then offering solutions.
PE human capital professionals have been spending time helping portcos clearly portray their brands to help in recruiting efforts.
Leadership and talent upgrading:
In portcos where turnover stabilized, PE human capital leaders have been able to spend more time on leadership and talent assessment.
Proactive PE firms are using market conditions as an opportunity to upgrade talent for the long term, including bringing in wartime generals in place of peacetime ministers. Interim executives and specialized recruiters have been common tools to execute these initiatives.
2023 Top Areas of Focus
Quantifying and communicating human capital initiatives:
Human capital leaders are using data, key performance metrics, and tools like scorecards to illustrate the value they are adding and/or progress being made within the portfolio.
Pay transparency:
Upcoming pay transparency rules are expected to have a meaningful impact on how companies recruit employees across the country. PE human capital professionals are getting up to speed on these new rules and making sure their portfolio companies are ready to comply.
Leadership to navigate tough economic conditions:
PE firm human capital professionals are supporting the evaluation of organizations to make sure they have the right players in the right seats, particularly with senior executives and one level down. They are encouraging portco leaders to be prepared to upgrade talent where needed and/or equip teams with leadership coaching to enhance skills if possible.
We thoroughly enjoyed these thought-provoking conversations that occurred during this recent gathering of PE human capital professionals. If we can be of assistance, please let us know.
Additionally, you may be interested in checking out some of our human capital-specific resources, which can be found here:
