We have witnessed a growing demand for CFOs with carve-out expertise. Tom Guy, Bronzegate Partner, shares the key skills investors are expecting from a successful carve-out CFO.

The carve-out and spin-off transactions market has seen significant momentum over the past year. In the first quarter of 2024, carve-outs accounted for 20% of deployment activity by value, compared to approximately 5% in Q1 2023 and 11% in Q4 2023*.

This robust carve-out activity reflects organisations’ ongoing efforts to strengthen their balance sheet and raise capital for investment in their core business. Private equity (PE) firms are often the preferred choice for these transactions due to their readily available capital and unique ability to add value to both existing and future management.

As a result of this trend, there is a growing demand for CFOs with carve-out expertise. In our experience investors have similar expectations about the skills they require from a successful carve-out CFO.

Key carve-out skills for PE CFOs

Finance Transformation

Every carve out situation is different. Some can operate as an established entity from day one and others require significant operational build to be independent. A successful CFO will need to lead companywide transformation often relating to people, process and reporting.

Finance Systems Improvement

There’s often a need to implement new finance systems or enhance existing ones to improve efficiency and effectiveness.

Banking Relationships and Debt Management

CFOs must quickly establish and manage effective banking relationships and oversee debt management as the business moves away from a ‘group finance’ structure.

Relationship Building

Whilst a carve out is usually the catalyst for company growth, it also brings about a period of change and transformation. The CFO can act as the conduit for this positive change, they are relied upon to build relationships across an organisation helping to define and communicate a new strategy and ensuring “buy in” from management/operational teams.

At Bronzegate, we assist private equity firms in identifying the qualities they require from their next portfolio CFO through our CFO Leadership Assessment Plan. This plan focuses on five key categories: Situation, Sector & Scale, Business Environment, Technical Skills, and Leadership Attributes.

Tom Guy, Partner, specialises in Private Equity CFO and Finance Leader appointments

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(*Source: EY Private Equity Pulse: key takeaways from Q1 2024)