Blog:

PE houses: Supporting your portfolio companies’ finance function

07 April 2021

Once the transaction has completed, accelerating growth becomes the priority. In-house finance teams may feel the pressure and are likely to face a new challenge as they work to support delivery of the 100-day strategic plan and beyond. 

Investee finance leaders face the following challenges post transaction:

  • Time consumed by tactical and operational elements of CFO/FD role
  • Lack of time to devote to strategic, value-add support to the business
  • Dealing with enhanced reporting and forecasting requirements
  • Lack of resource and technical skillset within finance team

So, where should a CFO/FD focus in the first 100 days and beyond to free up time and resource?

A review of existing resource and the level of required external support

The most successful CFOs will assess the day-to-day resource requirement for the first 100 days and beyond. One solution could be to look at outsourcing or ‘co-sourcing’ all, or part, of the back-office finance and compliance function. There is no fixed model – every business will have its inherent strengths and weaknesses and being able to call on external help to plug those gaps will add flexibility and agility to the solution.

Management information and reporting on Key Performance Indicators (KPIs)

A recurring issue impacting finance teams is placing too much focus on historical information. Considering the value forward looking data and accurate forecasts can bring to strategic decision making, what resources – internally or externally - are available to unlock value in this area?

Similarly, the KPIs that you consider most important for monitoring performance and evidencing the key value drivers may not be consistent with the KPIs produced previously and as such, there is likely to be a period of training and acclimatisation as these new formats embed.

Finance and accounting technology systems

The finance and accounting technology that investee businesses rely on may have been assessed before the completion of the PE investment. If that is not the case, then it is vital to ensure all systems (including back office systems in general) are able to cope with the new reporting requirements, group structure, potential new revenue streams and the likely increased pressure for complex financial information.

Dealing with enhanced financial reporting requirements

In-house finance teams may be facing new technical accounting challenges resulting from the need to account for the transaction itself, through to applying new accounting policies or even GAAP. The existing finance team may not have experience in preparing consolidated accounts, accounting for goodwill and intangible assets, complex financial instruments (like derivatives or hedging tools) or deferred tax liabilities.

Investee businesses may become subject to audit for the first time – adding additional pressure for in-house finance teams as they address the potentially higher standards of accounting and reporting required.

Embracing a fully outsourced, co-sourced or in-house support model

Exploring the ‘art of the possible’ from an outsourcing perspective can alleviate pressure on in-house finance teams. This can range from day to day processing support, to expert monthly reviews of the management information and KPIs – performed by an expert who understands the value drivers of the business.

Considering the disruption that replacing a CFO or Finance Director can cause to your investee business - avoid this all too common pitfall by supporting their finance team with tailored and scalable support.

To learn more about outsourcing services for your portfolio investees and for PE Houses, contact Gareth Lynton Jones or Jamie Carter.

Maximising productivity from your finance function

If you’re looking for further insights into ways your portfolio companies can leverage technology and maximise productivity within their finance function, visit our ‘Rethinking the Finance Function of the Future’ hub.

RETHINKING THE FINANCE FUNCTION OF THE FUTURE
 

Over the coming months, we’ll be publishing further content on the issues impacting finance teams facing transformation and change – so click to subscribe for further updates.

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