CFOs harnessing private equity skills can help the business in executing its strategy.
The chemistry between the CFO and CEO is absolutely crucial in the success of the business and of the transaction as whole. Post investment, management teams have to orientate themselves to new roles and responsibilities, which may take time to bed down. The importance of having a solid, resilient and dedicated CFO cannot be overstated for any business.
The role of the private equity (PE) CFO has evolved beyond traditional finance analytical ability and has become an important tool in the CFO skills-set. It is no longer just about reporting and accounts, it’s about overseeing the organisational structure, managing people, attracting and retaining staff and designing and implementing strategy.
Agile Capital acquired a shareholding in SA Biomedical in 2017. SA Biomedical is a leading South African distributor of medical devices and related products. The CFO of the business, Edna Retief, has seen first-hand the benefits of working with a private equity firm and in turn Agile Capital has validated the thesis of partnering with a strong management team, starting with the CFO.
“Once the transaction was finalised, we looked to combine the knowledge and experience of the Agile and SA Biomedical teams to accelerate growth and enhance the value of the business,’ notes Edna. She emphasises that an open and proactive communication approach needs to be a priority – no matter the situation. The ability to use the PE team as a sounding board, leveraging the experience and proficiency that resides with them, gives additional support and guidance when required. Harnessing these specific skills-sets provides the business with further impetus in executing its strategy.
In practical terms, aligning interests also has to do with providing tangible support and assistance. “With this partnership, we have a new appreciation for the value of our management accounts,” says Edna. “The accuracy of the report along with the information being supplied timeously impacts business decisions and very often adds a new depth to our forecasts, enabling us to manage with more foresight.” The importance of having the right people within the finance team who collaborate continuously and rely on each other to ensure that the necessary information is available cannot be overestimated. The finance team continually demonstrates a deep commitment to the business.
Edna adds that during this particularly challenging period, it’s become increasingly critical to really understand what drives the cash flow within the business and to know when things are set to change. This then propels an understanding of when things are set to change, and as such becomes a more valuable tool to the executive. The information available for access means the ability to really see the impact of various items on the cash flow. Again, the accuracy and timeous delivery of the data meant that to some extent the business is weathering the pandemic in a more apprised way.
“We’re also practically involved in the operational side of the business,” adds Edna, “not just reporting from a financial perspective, but equipping the business to be financially ‘fit’. By not hampering people with financial processes, but by aligning operational objectives as part of the financial plan, it’s allowed the business room for growth. Structures that address process control and management are vital for the success of any business in today’s complex market.”
While the past year has redefined both corporate and lifestyle realities, the nature of private equity remains the same. At Agile Capital the approach is always to invest in a business with good growth potential, coupled with a demonstrable track record of outperformance.
“Having a strong and knowledgeable management team with additional input from investors ensures a healthy business,” says Agile Capital senior associate Bulumko Ndema. “Private equity involves taking measured risks and with an effective management team in place, there is confidence that the risk will reap rewards. Ultimately, the PE team looks to support a solid foundation from which the business can grow – and steer it towards long-term success.”
Bulumko adds that, with their custodianship of the due diligence process, the CFO becomes the focal point around which the relationship with the management team develops. “The CFO becomes the axis for the business and the PE team.”
