If you’re a multi-time, PE-savvy CFO, chances are you’ve been called about an Operating Partner role… and chances are, you may have simply blown it off. Out of the last 50 recruiting calls you’ve received maybe you got 1 or 2 for Ops Partner roles; but be assured, those numbers will be steadily increasing in the near term.
As middle market PE firms have built out their internal portfolio operations capabilities, a logical move is for them to add a strong CFO or finance trained exec to the team. The reasons for it are compelling:
- The financial data to access during diligence needs a seasoned set of “operational” eyes pouring over it. Bankers make everything look pretty. CFOs find the warts.
- The Finance function in a middle market deal is generally under-professionalized and ill-prepared for life under a sponsor’s ownership.
- Many times a systems upgrade is a core element of the investment thesis. A CFO who’s implemented various technology packages is invaluable.
- Many middle market companies need to evolve from a controllership orientation to one built around strategy and FP&A.
- Managing a business which now has fresh debt on it is a new dynamic for many CEOs.
Outside of our Operating Partner Practice at Lancor, the function/role where we have the deepest experience base is CFO. Honestly, it is simply a result of the broader market in PE. Based on my crude analysis, in up to 75% of cases, our clients are changing out the CFOs in a newly acquired business. We like to say that in a PE deal the light burns hottest on the CFO. They are uncomfortably positioned in service to multiple masters, all of whom can make their lives quite miserable: Board members, CEOs, bankers, and 32 year-old wunderkinds inside the PE firm. It takes a special person to navigate amongst these myriad challenges.
When a firm does go out into the market looking for a Finance Operating Partner, they tend to be hyper-focused on the candidate’s EQ. Rightly or wrongly, CFOs aren’t generally known for their charismatic personalities, soft touch and influencing nature. As an Operating Partner, it’s not so much about how I’m right and you’re wrong, but more so about how can “we” be right together. Making the smart moves from the very outset of a relationship with portfolio company management is essential to the Finance Ops Partner creating value in a collaborative way. Operating Partners have a tendency to be viewed suspiciously by management to begin with. If the Finance Ops Partner isn’t delicate in how they introduce their “help” they risk being shut out.
So why should I consider a role like this? For starters, it can be a great way to touch some areas of industry that you wouldn’t otherwise have a chance to see. Lucky for you, there’s a widely held assumption that a finance professional should be able to communicate easily across various industry models and still add value. (The same cannot be said for CEOs who come into the Operating Partner chair.)
You’ll have opportunities to influence company leadership by simply leveraging your career’s worth of experiences. You can create some standardization around how to onboard a new company and give the investment partners time to focus on the next important deal.
Economically, you can spread your equity opportunity across a basket of investments instead of being beholden to the performance on one singular company.
So… next time, perhaps you might consider leaning in on an Operating Partner role. It could be a great way to spend the next phase of your career.
As a Partner at Lancor, Chris' practice is principally dedicated to serving private equity firms in North America and Europe. For the last ten years, he has focused on operating partner and other fund administration roles, and on C-suite roles for those firms’ portfolio companies, located around the world. He leads Lancor's Private Equity Practice and coordinates the firm’s coverage model in serving its clientele. He has spoken at various conferences on the role of the operating partner and, in 2008, BusinessWeek magazine recognized Chris as one of the “Top 100 World’s Most Influential Headhunters.”