Peter: I am currently working at AlixPartners, primarily taking on CFO interim roles and occasionally CRO roles. I initially aimed to become a CFO, but I began my career in auditing. I worked for many years in Berlin and New York, learning the basics of the profession. However, I knew early on that I wanted something different in the long term. After obtaining my American CPA certification, I resigned from auditing and transitioned into management consulting to broaden my skill set. Fifteen years ago, I joined AlixPartners, where I took on my first interim CFO mandate, and since then, I have been involved in numerous restructuring and transformation projects.
Christoph: From your experience, what are the specific requirements that private equity investors have when they are looking for a CFO for their company?
Peter: On the one hand, it’s about the spirit, and on the other hand, there’s a lot of detailed work involved in Private Equity. The CFO typically deals with a team of smart, analytically well-trained individuals who know how to read numbers and can ask critical questions. You need to be able to answer these questions. Stakeholder management is crucial.
In a Private Equity firm, there’s typically a plan on how to improve the company. At the same time, the time window is very tight, assuming you intend to hold the company for four to six years. Ideally, the transformation should be completed a year before the sale so that the financials align with the cycle, and you can showcase the change. That leaves about two to three years for other areas like growth, changes in the refactoring footprint, expansion into new markets, and so on. You need to work at full speed; otherwise, you’ll run into issues.
“The transformation should ideally be completed a year before the sale so that the financials align with the cycle, and you can showcase the change.”
Christoph:I can confirm this from our perspective as well. At FLEX Capital, we often encounter bootstrapped companies with founders who have primarily focused on product development or sales, and their financial situation may be rudimentary. In many cases, the founder or someone in a secondary role without the necessary qualifications has been handling financial matters. That’s why the CFO is typically the first position we aim to fill. We usually have the CFO we’d like to bring in ready from day one.
“The CFO is the very first position we fill. We usually have the CFO we’d like to bring in ready from day one.”
Peter:I believe this makes perfect sense for various reasons. Firstly, it represents a cultural shift. Suddenly, I have a CFO who has the numbers at their fingertips and questions the CEO’s decisions at times. In my opinion, it’s wise to establish the rules of the game as early as possible, in the business plan. This is what I want, and these are the people who should implement it. Is this also what you want? This approach is much better than bringing it up after six months. That’s a recipe for disaster.
Christoph:I think the partnership between HR and Finance is extremely important, especially for software companies in which we invest, where personnel costs make up between 60 and 80 percent of the expenses. When we venture into growth areas, we end up relying on a quartet consisting of the CEO of the target company, the CFO, the Head of HR, and us as investors. The CFO is the one who translates for us in the portfolio company, explaining why we have certain requirements, and acts as a sparring partner, providing feedback when what we’re suggesting may not be immediately feasible within the company.
Christoph: What are the requirements for a CFO in a private equity owned company?
Peter: It depends on the situation. Do I have a cost-driven or growth-driven case? Am I looking to expand internationally? There is no perfect CFO, but rather the right one for a specific situation.
That one should have a certain affinity for numbers is self-evident. What’s also important is stakeholder management. Understanding what the individual players want, translating and interpreting it. This requires a certain level of empathy and respect. Another point: The CFO should have their own opinion and, if necessary, be able to counterbalance.
A great example from a growth financing by a private equity company that operates fitness clubs: The investor invested heavily every year, the numbers looked great, and the company was growing. However, they didn’t realize that the old clubs were slowly deteriorating. It wasn’t immediately apparent because there were so many new clubs, but in the end, it cost them a three-digit million amount. Why? Because they didn’t have a good CFO who defined a reasonable like-for-like comparison and pointed out the issues.
“The CFO should have his or her own opinion and provide a counterpoint when needed.”
Christoph: Peter, you recently described the CFO as the CEO’s co-pilot. What does this statement mean?
Peter: When a CFO joins a Private Equity firm, it’s a complex situation. There’s limited time, a need to establish transparency, and a desire to achieve specific goals. This creates tension. You need a CEO who drives the company, generates ideas, and develops strategies, but you also need the person at the center of it all. I think this is a great analogy for the CFO – the spider in the web. The CFO is someone who connects with everyone, has a deep understanding of various aspects of the business, and uses financial data to make it clear what certain actions mean for the company. The CFO forms a central leadership team with the CEO, and they both play essential roles in presenting a clear and unified front to investors who seek a well-defined direction.
A CFO who merely manages numbers is not helpful; they must also protect, advise, and drive transformation alongside the CEO. This is the co-pilot role of the CFO. The importance of this role is evident in the fact that a quarter of today’s CEOs were once CFOs.
Christoph: We can observe the co-pilot function quite well. When we ask questions in negotiations that focus on the numbers, we often notice the CEO turning to their CFO with a look of seeking help. If the CFO is good, they have anticipated the question and have the numbers ready.
“The CFO is the spider in the web: they are someone who connects with everyone, who knows about many things, and who uses numbers to make people understand what an action actually means for the company.”
Peter:I don’t find failure to be a bad thing at first because you can learn a lot from it and do better in similar situations in the future. I’ve experienced this myself. Failure as a CFO, for me, is when you lose your CEO. Because I want to support them, want to develop a common plan. And poor stakeholder management is the beginning of the end for me.
Aside from that, I can make many smaller mistakes, for example, not communicating the expectations placed on me clearly. I also can’t say yes to everything as a CFO. There’s this nice saying: “Never go for the five minutes of glory in a supervisory board meeting.” Everyone will believe you if it takes twelve months to present certain numbers. Managing expectations is important.
Christoph: You speak with a lot of passion about the CFO job. What, in your view, makes the job so exciting?
Peter: I believe it’s the transformation. Yes, it can be painful, but once you’ve accomplished it, it’s very fulfilling. You also get to experience great stories: I may have doubled the size of a company or saved it from bankruptcy. But what excites me the most is the role of being the spider in the web: When I take on CFO roles, I not only coordinate the individual players in the company but often also set the program for what will be worked on in the next one or two years. The complexity of organizing transformation and then successfully implementing it – that’s what I find satisfying about the job.
