Private equity backed businesses are unlike any other. They are on a fast growth trajectory, with a timeline for exit from the outset. Change needs to happen immediately to drive the level of growth required by the investor. So, how can interim managers help, and when?
Situation: There is a lot of work to do to prepare for an MBO – due diligence, preparing the business plan and pitching to investors. On top of that, the CEO and management team needs to keep running the business and hitting their numbers. It’s a high-pressure situation.
Solution: There are two ways interim managers can help. One is to release the CEO from the day to day running of the business, allowing him/her to concentrate on executing the deal. The other is for an interim to take on much of the pre-deal preparation. Whilst a CEO may not have gone through this process before, an experienced interim may have done so many times, bringing invaluable expertise and taking off the pressure.
Situation: The deal has been done, the CEO and management team turn their attention to delivering the plan and the first year numbers. The business is likely to be undergoing a professionalisation process, and implementing new change programmes as per the strategy. Often, this is unchartered territory, a team may lack the experience or knowledge necessary to drive change quickly and efficiently. And, they have to do all this under the scrutiny of new investor stakeholders, and new MO.
Solution: The first 6 months or so are crucial, and can set the tone for the entire hold period. Quickly tackling big change projects can help keep things on track, and keep investors happy. Finance tends to be the area requiring the most change, and deploying an interim CFO who has bags of PE experience can really pay off. An experienced hand can bring stability, implement KPIs, professionalise reporting and manage cash, leaving the department fit for purpose and ready to support the business through to exit.
Situation: All roads lead to growth. It’s the primary goal, the reason the investor got involved in the first place. They want to exit with the maximum returns possible, with the business in the best shape it’s ever been. The growth strategy may involve acquisitions, internationalisation, new product development, new systems implementation, new channels to market – all of which may be completely new to a founder CEO who has nurtured a business from start-up stage.
Solution: New skills may be required for the duration of the project, or in order to steer the team down the right path. Interim managers – commercial directors, sales directors, marketing directors, operations directors, technology directors – can be immediately deployed to keep momentum and bring pace and experience to major projects such as these.
Disposal and exit preparation
Situation: At the other end of the investment cycle, the CEO and management team are once again embroiled in the process of selling the business. This time, the focus is on getting the best price, wooing trade buyers or private equity investors for an SBO. What doesn’t change is the pressure; keeping the business going, squeezing every ounce of growth out whilst tackling the pre-sale work.
Solution: Once again, hiring an interim manager pre-exit is a way of bringing in proven capabilities – either in running the business and allowing the CEO room to take on the pre-exit work, or by picking up much of the heavy lifting involved with the sale. The difference between bringing on additional experienced resource or struggling on can make a huge impact on the returns realised on exit.
Bringing in the right interims with the right mix of expertise can drive value into private equity backed businesses in many situations across the investment cycle. To find out more, download our interim research paper here.
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