Strategies For CFOs in Private Equity by Gary McGaghey

Chief Financial Officers (CFOs) find it difficult to transit from privately owned and listed companies to private equity companies. This difficulty results from the management of borrowed capital at private equity, contrary to the case of privately owned and listed companies. However, private equities give CFOs a better chance to prove their worth by driving a company to the prime of its success. Gary McGaghey, the group CFO at Williams Lea Tag, suggests the following strategies to help CFOs succeed in the private equity space.

Gary suggests that working in private equity requires a chief finance officer to be conversant with the complex cash flow requirements. Contrary to other companies, private equities depend on debts to run their investments. One must distinguish between what creates value and what creates cost by understanding critical data from various aspects of the company, such as IT and culture.

A private equity CFO needs to have a reliable fact base. Private equities rely on data-driven decision-making. One has to understand and build their knowledge of the company as quickly as possible. This can only be made possible through the help of reliable data and data analysis from a dedicated private equity analyst. In addition, data helps CFOs understand where and how to implement low-cost technologies to deliver high-value wins and realize benefits quickly without sabotaging the company’s long-term gains.

Gary adds that a CFO should have the ability to discover and acquire talent and build effective teams. From the pressure of delivering quick results to investors, one must identify employees who can deliver under various circumstances and pressures. Building teams also involves recruiting and coaching employees from other fields that can perform productively in the finance department.

Finally, Gary suggests that a CFO should have transformational leadership. Since one has a role in creating value for the company, they should have the company’s overall transformation in their mind. They should also clearly define the key performance indicators and robust metric management strategies.

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