Many finance executives dream of becoming the CFO of a private-equity portfolio company. While breaking into that clubby market can be hard, “everyone has to do it for the first time,” notes Sean Carroll, an executive recruiter for private-equity and other investment firms with Polachi Inc. Landing a portfolio-company role is not as much about having done it before as it is about “how you communicate what you like to do, and what you’re willing to do,” says Carroll.
So what do private-equity investors want to hear? Below, Carroll offers some dos and don’ts for those who are serious about making the move — or are assessing whether or not to try.
• Make inroads with CEOs and company founders who already have relationships with private-equity firms, rather than the investors themselves. “It’s still not easy; you have to knock on a lot of doors,” says Carroll. But most opportunities will come through former colleagues.
• Offer to be a consultant, as a “try before you buy” opportunity. Private-equity firms bring in part-time CFOs regularly, so if a finance executive is willing to come in on a contract basis to prove himself, he may have a better shot at a longer-term assignment.
• Hang in there if your firm is acquired by a private-equity firm. Carroll says it’s common for investors to give the person in the seat a chance, and even bring on a mentor to help them develop certain skills that may be lacking. They’ll even be patient through the first few board meetings and offer advice about how they want to see information presented. But if you make the same mistake more than once, watch out. “Typically these boards will be a little forgiving, they want to see people succeed,” says Carroll. “But they won’t stand for same mistakes for very long.”
• Don’t ask if you can hire a controller, or how big the staff is. Questions like these indicate a finance executive who only wants to “focus on the upper end of the role, and really looks down on the lower-end competencies,” like working with Quickbooks, says Carroll. A CFO at a private-equity-backed company needs to be willing to do whatever large or small finance-related task may arise. That can put candidates from public companies at a disadvantage, since they typically have had more resources at their disposal.
• Don’t show that you’re a master of historical data, to the exclusion of forward-looking recommendations. “To be very narrowly focused on [things like] budgets and reporting is less attractive for early-stage growth companies,” says Carroll. “You need to be able to look forward and model where the business is going.” In fact, past operational responsibilities such as customer service are often a prerequisite for such roles.
• Don’t equate management teams with the board. Reporting to a board is not the same as reporting to an executive team, where you’re all on the same side, says Carroll, and candidates sometimes confuse the two. “Things are going to be a bit more contentious with private-equity investors,” he says.