EquityFC Blog

What backers want at board meetings | 24 August 2009

If your business is private equity backed, there's a good chance that you'll have a general partner (GP) from the firm on your board - or possibly a non-exec well known to them. It's a monthly chance to put a good face forward with a key shareholder, of course, as well as an opportunity to pick their brains on strategic and operational decisions.

So this post from US VC Brad Feld should make interesting reading, both for FDs - at the meetings - and FCs, who are instrumental in ensuring the right information gets there. His five points boil down as follows:

1. Get the board pack out 48 hours in advance - so no-one has an excuse for not being prepared. (To which I add: this makes finance function discipline and solid business intelligence processes a must.)
2. Have a less formal chat beforehand - Feld suggests lunch or dinner the night before. (With tight schedules - especially for GPs - perhaps board meetings after lunch are a good plan. Or schedule a breakfast get-together?)
3. Start with the admin stuff and get it all done within 30 minutes. (Nice touch - it means all the necessary stuff is done with zero defects and warms up the board for the meaty debate to come.)
4. Discuss a one-slide financial summary for the period. (Again, sensible stuff - let the numbers tell the story. But the onus is on the FD and his or her team to get that slide just right. Don't overcomplicate it - but keep it informative.)
5. Then the CEO offers a one-slide bulletted agenda for the rest of the meeting.

The best thing about this tip list? There are only two pages to consider in the meeting. The meat of the data all comes in the board pack and the focus is on useful debate. The PE GP should love it.

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Something lighthearted for Friday | 7 August 2009

Private equity investment can be challenging for both sides, and this instructional video demonstrates. Perhaps they needed a financial controller to make sense of it all...

Awkward silences at the Dragon's Den

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The trillion-dollar question: will you beat the rush? | 4 August 2009

If I was a manager in an unloved division of some faceless corporate giant, I'd be sharpening my pencil about now. The MBO market is going to blossom at some point over the next 12 months, and private equity firms are going to be scavenging for every last viable opportunity. Guys with half-decent business plans - and some sound financials to back them up - are going to be gold-dust.

If that seems a bold assertion, consider this: there's now estimated to be $1,000,000,000,000 of private equity cash sitting on the sidelines. As bloggingbuyouts explains: "The United States led the world with $608.9bn in uncommitted capital, with Europe at $286.3bn and the rest of the world at $183.4bn. The buyout sector remains the largest with $507.1bn in dry powder waiting for acquisition targets to be identified. Real estate funds are sitting on $194.1bn, and venture funds have $153bn waiting to be put into action."

While that's going to create a lot of activity - and openings for finance execs, natch - two other things to bear in mind. First, if you're already PE-backed, your GPs might well be able to fund acquisitions if they have a compelling logic. A recession is a great time to build a new corporate giant, and if we have a double-dip downturn, expect acquisition prices to drop to attractive levels around Christmas.

And second, those prices are going to climb pretty soon. If the floodgates open - and I think we're talking about an obvious and sustained return to economic stability plus a bit of liquidity in debt markets - competition for assets is going to fierce. So smart FDs and FCs will be working hard to show their own business is as efficient as possible in areas like cash conversion - instilling confidence in their backers to act early and beat the rush.

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PE IPOs may be back - but does it matter? | 3 August 2009

For well over a year now, private equity firms have been facing a churn problem. With debt markets closed, trade buyers nursing their balance sheets and stock markets in free-fall, exits have been thin on the ground. Fewer exits means fewer deals.

That's been sort-of good news for finance execs. PE firms have had to focus on performance issues at portfolio businesses - often bringing in or beefing up a finance team including and FD or FC. And we do like to see exciting opportunities for finance execs in PE-backed businesses facing interesting challenges.

No it seems one exit route - flotations - is back on the agenda. KKR is reported to be putting several of its businesses into the market -but it's not hard to find news of several other sizeable IPO exits on the starting blocks, including Bird's Eye, United Biscuits and Weetabix.

But here's the thing: does that really make any difference? Having had its worst year on record in 2008, private equity was never going to just roll over and die. PE firms have responded with more focus on operational improvement than financial engineering (and so much the better, say many of us). They've engaged in equity-only deals, commonly using innovative debt swap tools - like the recent Foundation Group acquisition by Gresham Private Equity.

And in the mid-market, at any rate, deals have continued to flow, albeit at a slower pace. Point being, the re-emergence of the public equity markets as a potential exit route is welcome - and should have those of you interested in PE-backed FD and FC jobs weighing up the kind of skills or strategy you might bring to the party these days.

But it doesn't change the fundamentals for fast-growth, equity-backed businesses. Strong all-rounders with good general business skills, a steely grip on cash, sound communication skills and leadership qualities are always top of the shopping list.

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