Public markets, private equity, banks and more: Business leaders pick their chosen ownership model

Speaking to Real Business in 2014 ahead of Real FD Live, Swiftkey CFO Richard Gibson explained: “The overriding challenge for a CFO is managing the business in the context of massive business uncertainty and rapid business change.”

This was crucially highlighted in a panel debate where CFOs and FDs of fast-growth UK businesses came together. Essentially, different ownership structures have placed different demands on FDs, namely the skill sets being sought for each model. 

Stephen Lane, FD of Xtrac, drew from previous experience and compared the different skills you needed for each scenario.

“I think there’s a very clear contrast between the different types of ownership models,” he said. “Looking back, working at a large conglomerate was very good as a training ground. It enabled me to get into a lot of parts of the business. Ultimately, however, it was about reporting numbers up the chain and I recognised that I was a small part of the process.

“A public company is very much about the regulation, while the private equity world is all about trying to drive growth through that business. But it’s not so much looking at the here and now, but looking about what ‘might be’. So therefore, a very clear plan to deliver growth to support some kind of exit where that investment would be needs to be realised.”

Stephen Joseph, CFO of Ocean Outdoor, added: “You get the best of both worlds in the private equity backed growth plan business. You get to make key decisions on a daily basis, but you’ve got that level of corporate governance. But I don’t think I would suitnow going into that big corporate style and I think a lot of CFOs in my position think the same now.”

But not all private equity ownerships are the same. Joseph has had quite a different experience.

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“When we first started Ocean I joined alongside the VC backers when they had identified that this little business had secured a great contract but was run by a very entrepreneurial owner at the time, who was much more focussed on signing up deals and strategic moves. One of the distinctions you can make about VC is that the VC guys will work alongside founders. They’re all ex-accountants and parachuting in, which is why they often fulfil that interim FD role. But they know its not sustainable to create value for themselves so they tend to hire people that are going to work very closely with the CEO, but will also have an eye on the numbers across the board.

“The guys that have just brought us, they’re all large PEs. I asked one them what the CFO of Boots does compared to us and he said it’s a world away. The CFO of Boots is just concentrating on tax regime, tax structuring, regulation, and commercial agreements. You’ve got to be a certain type of person to have gone through that development career path to end up as CFO of that level.”

James Bodha, CFO at Thunderhead, who has held numerous finance roles spanning across Europe, the UK and North America, threw his own spanner into the works.

“VC tends to move at a quicker pace,” he suggested. “You can make decisions a lot more quickly because there’s not as much governance, something which will suit people who like that speed of change. From personal experience, they’re much more interested in KPIs than your annual report. I’ve had people come and talk to me about getting into private equity and VC-backed businesses, but the challenge there is how to get into them. VC funds don’t tend to want to take risks with people who’ve been in a more corporate environment.

“That aside, I worked in a Swiss-listed business for four years where, when I first presented my accounts to the banks and the pension funds, they seemed to be more interested in what exchange rate I was using and if there was a consistency of exchange rates throughout the accounts rather than talking about the performance of the business. Not to stereotype, but I think the funds and the banks willing to loan are more concerned about regulation. In that sense I think a more technically orientated CFO may find their skills playing more into a public company type of scenario.”

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Lane admitted that it was only through trying all the various models that he stumbled across what he wanted to do.

“I’ve worked in divisions of large conglomerates, private equity, and listed PLC’s. But I think I first needed to test the waters, which almost forced my mind into thinking ‘well actually what I really want to be in is a small private company, with some form of growth trajectory and a potential exit of one kind or another at the end’,” he said. “That’s where I am now.”

“If that’s contrast to where I am now. The ethos of Xtrac is about being an employee company. Some 49 per cent of the business is owned through an employee trust and 51 per cent is retained by the managing director and the board of directors. So we still have control of the business, but we have this intangible benefit we like to call ‘Xtrac DNA’. I can walk around our factory or engineering facility and talk to people who’ve gotten 15-20 years experience in our business. If you cut them they’ve got Xtrac through their veins. It enables them to be more passionate about the journey that they’re on.

“My role in that context is really about trying to articulate the story of where we’re going, making sure people understand where we’re going and what we want to do, and to bring those people along, partly because they own shares in the business.”

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