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The rise of the Rose: From FD to PE

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It’s the kind of comment finance directors – and plenty of others in business, come to that – long to hear. “When I came out of corporate finance practice, I was a bit stunned by what it meant to actually do a proper job. I had no idea about commerce, even though I’d specialised in advising companies on acquisitions.”

Stuart Rose had spent 13 years as a chartered accountant, latterly specialising in corporate finance, when he joined the Body Shop in 1987. His disarming honesty about the difference between the MBAs of the corporate finance world and front-line businesspeople make refreshing reading, especially in an era when the latter seem to spend so much time having to convince the former that they know what they’re doing.

Rose was no slouch when it came to learning about real business once he got into it, though. He devoured the experience at the Body Shop – having worked with Gordon and Anita Roddick for five years while he was in corporate finance helped – becoming first MD and then chairman of the cosmetic retailer.

And one of his big lessons, as an accountant himself, was that entrepreneurial businesses are great for an FD. “I still see that today,” he says. His most recent example is the Business Growth Fund-backed kids accessories company Trunki, where Rose is chairman. “We’ve just appointed a finance director who sees it as a great opportunity to get his teeth into the commercial and operational side of business, not just bury himself in numbers. There’s no doubt: as a finance person, you can do an awful lot more in that kind of situation than in a less ‘soulful’ business.”

Stick at it

But let’s not get carried away. Entrepreneurial businesses aren’t just there to provide stimulation for finance folk. “An FD is utterly vital to a growing business,” Rose says. “He or she is really the glue that brings and holds everything together. I’m always clear on this: you need one. Apart from anything else, they’re highly trained and have strong analytical capabilities – and it’s perfectly possible for those qualities to be absent from an otherwise very strong board.”

Rose has some unique advantages when it comes to offering FDs advice. He’s operated in both the public and private arenas (more on that later). He’s worked in some of the UK’s most successful growth businesses (Giraffe, Agent Provocateur, Gerard Restaurants, MKM). And he brings and accountant’s sensibilities to observing their shifting requirements.

“For example, as a business gets bigger, the finance director’s role has to change,” Rose says. “Their own department should be growing and they have access to more, and more capable, people. That ought to free up their time to reflect on the whole sweep of the business and take a more strategic view.”

In other words, they can fulfil their role as the glue for the organisation by aligning sometimes disparate functions. That starts with something as mundane as the board papers. “It’s the FD who chases sales and marketing or operations for their information, to see if their numbers make sense,” says Rose. “That means they’re the ones holding everyone to account and making sure they’re all working together.”

Privacy and freedom

Rose has spent the past few years working with private equity houses like BGF, 3i and Piper Private Equity. And having experienced life in the quoted sector with Body Shop, you can see why they like him. He speaks with first-hand knowledge about the benefits for management of going private.

“I went in [as chairman] to Hamleys when Bauger bought it,” he says. “And for the team there, private equity ownership was a blessed relief after being in the public eye. Management had felt slave to the City analysts.

“When that happens – and it’s even worse if you’re reporting quarterly with a US listing, for example – you simply don’t get the chance to do the right things for the business. There’s never the freedom to make long-term decisions because people are looking at short-term results.”

Rose is clear that any business has periodic needs for re-invention. “And in the private arena, you tend to have more freedom to do that,” he continues. “You can agree a long-term plan with your PE backer, for example, which might include a period of lower returns that means you’re able to invest more heavily. In the listed arena, shareholders are much more distant. But with PE, it’s a much more open and flexible relationship. And the PE people tend to be pretty smart – so they offer up views that create different perspectives for the management team.”

A Rose by any other name

There’s another reason FDs ought to like him. While many in the PE industry will confess to being pretty tough with finance execs (and their casualty rate in portfolio business is anecdotally pretty high) or wanting to convert them into their lapdog on the board, Rose thinks they should be embracing the entrepreneurial FD.

“A lot of people talk about the FD ‘delivering the right numbers’,” he says. “But I think that’s missing the point. The management team delivers the numbers – and the FD is there to offer analysis, make sure they’re presented right and that the team has been properly focused on how they can be delivered.

“True, the air is going to get pretty frosty in any meeting with a PE house if the FD can’t explain the numbers in fine detail,” he adds. “And in every organisation, PE-backed or otherwise, FDs have to ensure the monthly accounts are spot on – that’s the buy-in. But for any entrepreneurial FD, working in PE should allow for a wider role.”

Rose will be talking about his own experiences in business and what it’s like to work with some great PE investors – and some great FDs – at the Entrepreneurial FD conference on October 23 in London. With his CV – and his disarming frankness – you’d be a fool to miss it. As he points out at the end of our interview, “I’m an FD lover.” We plan to make the feeling mutual.

Richard Young is a freelance writer, founding editor of Real Finance and consulting strategic editor for the ICAEW Faculties.

Rose will be talking about his own experiences in business and what it’s like to work with some great private equity investors – and some great FDs – at the Entrepreneurial FD conference on October 23 in London. With his CV – and his disarming frankness – you’d be a fool to miss it. As he points out at the end of our interview, “I’m an FD lover.” We plan to make the feeling mutual.

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