I recently attended an FEI New York City Chapter meeting that included a panel discussion on the topic of “Private Equity & Portfolio Companies: Finding Success.”
The Transaction Advisory Services Practice Leader from Grant Thornton moderated the panel. It also included senior Finance executives from private equity companies as well as portfolio companies.
The panelists discussed the value that private equity companies bring to the table in terms of active management of companies, contrasting it against the hands-off approach of passive investors. They also discussed best practices in governance for private equity-owned companies and the role of the CFO.
Here’s some of the key points that panelists highlighted:
- Adopt public company standards – regular board meetings, financial reporting, auditing
- CFO coordinates communications between owners, CEO, operating management
- CFO should be active advisor to CEO, voice of reason, help make decisions based on fact vs. emotional attachment to certain parts of the business
How to drive operations improvements:
- Focus and leverage the “catalyst” in the business, focus on driving growth
- Pursue acquisitions that provide value, add to and leverage the “platform”
- Track key metrics, managing and reducing costs where needed
- Adopt long-term view of the business, 3-5 year vision
- Bring discipline and sense of urgency to the business
Key traits of CFO in private equity company:
- Be objective, data-oriented
- Provide active leadership, execution
- Ensure credibility – accurate reporting and forecasting, data analysis, advice
- Bring high energy, commitment, and effort
It was a great session held in front of a packed house of over 100 attendees at Grant Thornton’s office in New York City. The discussion got me thinking about how cloud-based EPM solutions can help support the needs of private equity investment companies as well as their portfolio companies.
For example, cloud-based EPM solutions can support private equity companies who invest in multiple businesses and need to manage a portfolio of companies over time and report their financial results. In this case, cloud-based financial consolidation and reporting systems can be a big advantage.
They can be set up and deployed quickly. They can integrate data from multiple GLs. They can easily consolidate and report financial results on a repeatable, predictable schedule. All that plus they don’t require a large up-front investment. New portfolio investments and acquisition can also quickly and easily be incorporated.
For portfolio companies owned by private equity, cloud-based EPM solutions can help them adopt financial governance processes of larger enterprises. This includes quickly consolidating financial results from single or multiple GLs and providing timely and accurate reporting to investors.
Cloud-based financial consolidation and reporting applications can also provide detailed audit trails for both internal and external auditors. In addition, cloud-based EPM solutions can support planning, forecasting, management, reporting, and tracking of key performance metrics.
Planful has a number of private equity companies who use our cloud-based EPM suite to consolidate and report on their portfolio companies. One that I met recently at our user conference is Advent International in Boston.
To learn more about Planful Cloud EPM solutions, visit our website at www.hostanalytics.com.