With the turn of the calendar to 2018, many of us contemplate our short- and medium-term career goals. Financial services professionals often ask us how they can parlay their skills from a career in investment banking, PE or investing into a position as a PE-backed chief financial officer.
Above all, PE companies look for CFO candidates whose backgrounds match their investment theses. However, while many skills translate from Wall Street to Main Street, there are certain caveats that investment banking and PE professionals should consider if they want to ensure that this is a viable, alternative career path.
First, it’s important to understand that portfolio company financial management requires skills and expertise in two main areas: prevention of loss and acquisition of gain. Many Wall Street-trained financial professionals are experts at the acquisition of gain, using their foundational skills in strategy, deal-making, financial planning and analysis (FP&A), communication and relationship-building to achieve growth.
But what about the prevention of loss? If you are an investment banking or PE professional aspiring to be a CFO, it is important to complement your FP&A, Treasury, capital-markets and deal-making skills with a solid foundation in accounting, controls, information systems and operations.
In fact, when we see Wall Street-trained CFOs fail at PE-backed middle-market companies, it is largely related to their inability to appreciate the nuances of back-office operations, and in particular, the challenges associated with back-office integrations and financial systems development.
Some PE firms with aggressive growth strategies pair a CFO with an investment banking background with a strong CPA or controller who understands accounting on a granular level and has a background in systems and operations.
Nevertheless, these firms rely upon the CFO’s ability to go deep into the numbers and provide executive oversight on all aspects of the back-office. If the CFO doesn’t have a sufficient foundation in accounting, finance and operations, then they will have difficulty meeting the demands of the PE owner. The bottom line: If you are gunning for a PE-backed CFO position, make sure to brush up on your accounting skills.
In addition, it’s critical to understand the three-dimensional aspects of an “A-player” CFO.
The first is growth – or the “sail.” The second encompasses processes, controls, systems and reporting – or the “rudder.” The third is leading and managing people – or the “team.” It is especially important for those early in their careers to develop expertise in these three areas.
If your desire is to ultimately focus on growth and M&A and you are already in investment banking, consider transitioning to an operationally focused PE fund or to a public accounting or consulting firm. Alternatively, consider starting at a public accounting firm and then moving over into transaction advisory, PE or investment banking.
In any case, the price of admission is a rigorous academic background in accounting and finance and a strong work ethic. Regardless of the path you choose, a successful CFO marries a variety of skills together and should pursue paths that give you experience across the spectrum. That’s what it takes to impress demanding PE owners making the hiring decisions.
Joy D’Amore is the director of executive search and David Haslam is the director of talent at CBIZ, which provides financial and operational consulting and recruiting to private equity-backed, entrepreneur-led and publicly traded middle-market companies and PE firms.
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