Deloitte special: On the record with General Atlantic

Bob Swan

What are the main requirements the CFO of a private equity-backed company should have?

At General Atlantic, there are three fundamental requirements that we’re looking for in a CFO. First, we’re looking for a CFO who is functionally extremely competent, who is operationally engaged and who is strategically part of the dialogue framing the strategic agenda for the company going forward. Obviously, a CFO needs to have all the functional skills necessary to be in such a role in today’s dynamic environment, including financial planning, accounting, tax and treasury, and M&A.

Secondly, we’re also looking for a CFO who’s very comfortable with the operating dynamics of the business and in engaging with the operating team in a leadership capacity. So, not just a functional expert, but somebody who can bring those functional skills to bear as one of the leaders of the business. Finally, the CFO should also be able to engage strategically with the chief executive officer and the company’s investors in charting a strategic course forward.

What is the most important role of the CFO?

At the most macro level, the CFO in our portfolio companies is the ‘chief capital allocator,’ who can look at a variety of different ideas and evaluate those ideas to ensure that the capital they’re putting to work can help the team achieve its growth objectives. The role of the CFO is a multifaceted role, but at its fundamental core, it is about effectively allocating capital against the best ideas that will yield the growth prospects that the team is counting on. In the world of growth investing, a CFO needs to understand strategically where a company is headed. Sometimes you need to have the analytical capabilities.

Sometimes you need to have the ability to assess the human capital of the firm. The CFO needs to be able to determine whether the company should be allocating capital organically to achieve its growth plans, or whether it should be allocating capital acquisitively to extend its reach through M&As or investments. In this position, the CFO also has the ability to say no to those ideas that may stretch the team too thin or may not achieve the growth aspects that the company is hoping and counting on.

What are some of the internal resources that the CFO of a private equity-backed company has?

At its core, a company may have a chief accounting officer, a treasurer, a head of tax, a financial planning and analysis executive, and either directly or indirectly, a team member responsible for M&A-related activity. How big those teams tend to be is really more a function of the size, complexity, and global characteristics of the company.

In addition to that, sometimes a CFO may take on a broader role other than the functional requirements of the job. For example, a CFO may have legal, human resources, or other operational responsibilities that are part of his or her mandate, either directly or indirectly. At General Atlantic, we have roughly 65 portfolio companies in five different sectors across five geographies so the nature and the roles of our CFOs and their teams vary quite a bit.

How does the role of a private equity-backed company CFO differ from that of a publicly-traded company?

The roles are fairly similar. At the end of the day, the CFO role is basically to create shareholder value and not just be somebody who’s counting the beans, but somebody who’s helping the beans grow over time, whether you have private investors or public investors. Obviously a private equity-backed company, depending on the nature of the industry and of its capitalization table, also has the ability to engage with its investor base in a way where it can leverage private equity investors for inside learning capabilities that the firm may have at their disposal, but that the company itself may not have.

That’s a key aspect at General Atlantic where we have a group of operating resources called the Resources Group that can engage operationally and functionally with the CFO to help him or her address the challenges they find along the way. In our portfolio companies, that CFO has the ability to lever the capabilities and bench strength that General Atlantic brings to the table through our Resources Group.

How can a private equity firm be a resource to a CFO?

At General Atlantic we are very focused on working closely with our portfolio companies on company building efforts to help accelerate growth and prepare a business to scale. Our portfolio companies are already on a strong growth trajectory – our goal is to enhance it. We’ve built a seasoned team within our Resources Group that has experience across multiple aspects of what a company goes through as it grows and scales the business.

For our CFOs, this means that they have a value-added partner that is there to support them and be a sounding board as they work to create a best-in-class finance function with their companies. Depending on the company, this could mean anything from working with the CFO on improved governance and controls, to supporting them as they evaluate M&A opportunities to support inorganic growth, to helping them think through steps to prepare for an IPO.

At the end of the day, we understand how critical the role of the CFO is to our portfolio companies’ success and thus aim to form a true partnership with our CFOs.

Bob Swan joined General Atlantic in 2015 as an operating partner, where he works closely with the firm’s global portfolio companies. Swan previously served as chief financial officer at eBay, Electronic Data Systems, TRW, Inc. and Webvan Group. He began his career at General Electric, where he held a number of senior finance roles. General Atlantic is a global growth equity firm that invests in five industry sectors: internet & technology, financial services, business services, healthcare and retail & consumer.

 This article is sponsored by Deloitte. It was published in the September supplement with pfm magazine.