Interim Executives Help Grow Private Equity Portfolio Companies

It’s not uncommon for private equity portfolio companies to double or even triple growth thanks to merger or acquisition. Albeit positive, rapid growth brings new operational challenges that can stop the upward momentum in its tracks. Interim executives bring the expertise needed to enable growth on a massive scale.

“Sometimes a business will start with $40 million in sales, and through acquisition will be two or three times that size. Often that creates an environment where you need to add to the management team, whether that be the CFO or the CEO,” said Forest Wester, a Partner at Trivest Partners that leverages interim executives to enable growth.

Private equity funds use interim executives in a variety of scenarios. However, these scenarios are typically problems that need to be solved such as the abrupt departure of a CEO.

Interim Executives Build M&A Deal Teams

Forward-thinking private equity portfolio companies know that interim executives can rapidly produce above-market and above-average returns. These savvy companies leverage interim executives to build management & acquisition teams.

For example, an interim CFO or COO can quickly assess your internal team’s capabilities and determine if there is a need for additional specialists. These executive deal teams are true “A-teams” that maximize growth during merger and acquisition transitions.

“There’s this holistic approach that you can bring in one or more — even up to a set of resources — a team if you will —  at the C-level, into the portfolio company to go help,”  explains Robert Jordan, CEO InterimExecs who has worked closely for 18 with private equity firms.

Interim Executives Have Expert Knowledge Across Multiple Industries

Interim executives are not only highly-qualified and vetted leaders, but they also bring a network of industry connections. They have enjoyed long careers with impeccable track records of completing mergers, acquisitions, and spin-offs. Others have a wealth of entrepreneurial experience under their belt that encompasses everything from launching companies, to sale, or IPO.

Interim Chief Financial Officers and Chief Operating Officers Establish Better Systems

Mergers and acquisitions bring the recurring challenge of seamlessly integrating systems rapidly for portfolio companies.

Permanent CEOs and senior leadership are great at running day-to-day operations. But when their companies branch out to new industries or are faced with unfamiliar technologies, it becomes a challenge that can impede growth.

During a major acquisition or merger, many organizations lack specialized expertise or have low technological cultural fluency. Onboarding permanent leadership to align or develop new systems takes time and resources. Unfortunately, this can slow business and digital transformation.

“A lot of times the owner started a business, knew the industry, and knew how to grow the business, but has been doing it such a long time, and doesn’t know how to take the company to the next level.” – Yoav Cohen, Interim CFO

A seasoned interim executive can establish and optimize systems and processes with agility. An interim CIO or CTO who brings in-depth experience across multiple ERP implementations can get companies up to speed rapidly. They also can orchestrate a seamless hand-off to leadership teams.

Interim Executives Help Private Equity Portfolio Companies Prepare For Sale and Closing

Interim executives are very familiar with the sale process. All to often the operation side of IT and infrastructure is often overlooked and not evaluated during the presale period. This can put private equity portfolio companies at risk for inefficient operations and losses.

“I’ve worked in the past in establishing doing those assessments to both pre-deal to determine evaluations – to give them an idea of whether what their buying is worthwhile or not in terms of infrastructure,” says Jim Gordon, an Interim Chief Operating Officer that has worked on many PE backed consumer products and manufacturing companies ranging from Maclaren baby carriages to medical device manufacturer OrthoSensor to CPG baby products company Babyganics.

Interim Chief Operating Officers can conduct a thorough investigation to determine if a merger or acquisition provides the maximum future return on investment.

An Interim CFO Can Lead Acquired Companies or Manage Multiple Companies Post-Merger

Often newly acquired companies don’t have a CFO. By bringing on an interim CFO, companies save time and resources that otherwise would be spent on a long and arduous hiring process of a permanent executive. An interim executive can begin immediately — sometimes within a matter of days.

Chris Sheeran, Partner at Huron Capital Partners, has encountered this scenario on a number of occasions.

“Very often they [acquired companies] don’t have a true CFO and that’s critical for us. We’re going to hire a fulltime or a really strong CFO in every one of our companies, but you might not have that person ready to go on day one and so we’re going to bring in somebody on an interim basis,” said Sheeran.

An interim CFO can also be brought in to manage multiple businesses that are combined post-merger. Most likely, the companies are on different systems. A great interim CFO can help bridge the gap during transition ensuring seamless optimization and integration of systems.

“If we get in an environment where there is sort of an explosive growth where we combine a couple of different businesses and you see somebody being responsible for not just one entity now in one location but  multiple locations,” said Wester.

When private equity portfolio companies bring on an interim executive, they are empowered to grow with great agility. With the guidance and expertise of interim CFO, COO, or CEO, they can act quickly on market opportunities. Interim executives enable companies by building capability internally.

By embracing the wisdom of an interim executive, organizations find themselves better positioned to scale, adapt, and discover new opportunities.

“…Doubling or tripling sales over five years — those are the real home runs. That’s really at the end of the day what we’re trying to do.” said Sheeran.