Private Equity Solve Portfolio Company Challenges with Interim Executive

Interim executives benefit companies dramatically: high-level expertise drops in quickly to do the tough jobs — powerfully and without bias or politicking — to help a company improve. Soon after, they ride off into the sunset to the next assignment. Think of an interim executive as a modern-day John Wayne without the cowboy hat.

Mark Sullivan, founder of Lineage Capital Investment, knows how it works. His private equity firm recently dropped an interim CFO into a manufacturing business amid a turnaround. Monetary villains — so to speak — threatened the corporate ranch and outside help was essential to clean out the threat.

The interim was “able to come in, quickly interact with the lender, and work with the lender to get the company some breathing room,” Sullivan said. He said the executive’s previous experience and immediate work to put together a cash-flow forecast allowed the company some credibility, and gave the lender some comfort regarding the current state of business and where it was headed.

With his PE firm investing in lower to middle-market companies, the portfolio businesses often don’t have sophisticated financial functions in place. Until they’re ready to hire a permanent employee, they use interim CFOs to strengthen the financial picture, he said.

While interim CFOs number among the most frequent type of C-level executive serving in interim engagements, C-level executives along the wide range of functional specialties are ready to ride. Interim management is a highly specialized field that attracts executives who thrive on challenging situations.

Most interim executives savor the challenge and the independence. “It suits my temperament,” said Neil Kane, an interim CEO who’s worked to transfer technology from academia and research labs to several start-up ventures. “If something better comes along for me, disengaging is painless,” as tenures generally range from as short as 3 months to 18 months.

As for Sullivan, his firm currently has seven investments, and, at the time this article was written, was considering hiring an interim CFO for a consumer goods company that had a CFO but had been growing dramatically and embarking upon systems implementation. The idea was that more financial horsepower was in order. Time to corral another interim executive.