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Strategic Chief Financial Officer – Private Equity

Published on: July 17, 2015

A strategic chief financial officer has strengths in the areas of corporate development, capital markets, investor relations and corporate strategy. A strategic chief financial officer is expected to partner with the chief executive officer and other functional leaders of the company to drive strategic and operational decisions. Typically, a strategic chief financial officer has an MBA and progressive finance experience, versus a background in public accounting and a CPA. Private equity firms will recruit a strategic chief financial officer for their portfolio companies in the following situations:

  1. The portfolio company operates as a platform for subsequent acquisitions (roll-up).
  2. The portfolio company is capital intensive and needs to raise a significant amount of money.
  3. The portfolio company does not have a chief operating officer and the chief financial officer is expected to partner with the chief executive officer to lead business operations.

Benefits:

A strategic chief financial officer can have a significant impact on the performance and valuation of the company through their ability to drive the corporate strategy, successfully acquire other companies, optimize the company’s capital structure and help drive business operations.

Concerns:

The concern with hiring a strategic chief financial officer is that they typically did not start their careers as a CPA and are less skilled in the areas of technical accounting, global consolidations and post-acquisition integration functions. For example, a strategic chief financial officer may be particularly skilled at working with sell-side equity research analysts or valuation modeling but may have very limited experience reviewing internal control documentation or directly managing the month end accounting close. To mitigate this concern, the strategic chief financial officer needs to hire an experienced controller or chief accounting officer who will ensure the proper internal controls, accounting policies and IT systems are in place to produce timely and accurate financial statements.

Additional Comments:

  • Based upon our experience, a strategic chief financial officer is typically paid 20% more than an accounting chief financial officer. In addition, a strategic chief financial officer will receive larger equity grants.
  • A strategic chief financial officer is typically compensated as one of the top three executives in the company.

 

Ken Prepared by: Kenneth R Philbrick III, CPA, Partner, Adam James International

Ken Philbrick is a Partner at Adam James International. Ken specializes in conducting retained search assignments for executive level finance and accounting positions including: Chief Financial Officer, Vice President of Finance, Chief Accounting Officer, Controller, Treasurer, Director or Vice President of Investor Relations and Finance Director. Ken has active relationships with over 30 private equity firms and their portfolio companies. He also works closely with Fortune 500 companies to recruit senior financial executives.