Interview with Jonathan Alpert
Interviewer: Andrew Zezas, SIOR
Following is the transcript of a CFO Studio interview between Andrew Zezas, CEO of New Jersey based Real Estate Strategies Corporation and finance executive, Jonathan Alpert, CFO and Business Partner.
Visit www.CFOstudio.com to read about this interview and to watch the entire video interview.
CFOs in a Private Equity World
Zezas: Welcome to CFO Studio. I am your host, Andrew Zezas. I am joined today by Jonathan Alpert. Mr. Alpert is a CFO and business partner with 30 years in finance and consumer products including wine and spirits, beverages, snacks, and more. Mr. Alpert is also a member of the board of directors of the New Jersey Chapter of Financial Executives International. Jonathan, it’s wonderful to have you here on CFO Studio.
Alpert: Thank you Andy for having me.
Zezas: Jonathan, we’ve got an excellent topic to talk about today: The CFO in a Private Equity World. So, let’s jump right into it and share with our viewers, what’s going on with private equity these days.
Alpert: There’s an enormous amount of activity that started late last year and has continued on to this year. After 2008-2009, where these companies raised billions of dollars and then couldn’t and wouldn’t invest them, activity has picked up enormously. They’re buying companies, they’re selling companies, they’re competing against strategic buyers, and the market has picked up enormously.
Zezas: Now, they’re not just buying, but they’re active sellers, too.
Zezas: Excellent. Now, are there any sectors that are particularly hotter than others?
Alpert: Well, the obvious sector is technology and the internet where we all read every day about Facebook, Myspace, Xanga, and all those guys. And, the little technology companies, everyone is playing there. But, in consumer products, there has always been activity. There was activity in 2008-2009. It was a bit more difficult, but there was activity there, and that has picked up and there are lots of transactions. There is a lot of selling, a lot of buying. PE firms have kept their portfolios on the sidelines. They are now selling and going after new companies, a great deal of activity.
Zezas: You know, I have to tell you that’s exciting because we always hear about the tech bubbles that do this, but you said consistently even through the down economy, consumer products are being bought and sold.
Zezas: Excellent information. So, let’s stay in that vein and focus on mid-cap companies, publicly-held, privately-held entrepreneurial owned companies, and private equity owned companies. Operationally, strategically, how are they different today on a company level?
Alpert: On a company level, an entrepreneurial and a mid-cap privately owned company all operate on small teams, cross functional, trying to drive growth. The privately owned company has a broader time horizon. They can afford to wait next year. A private equity owned company is on a short lease. They have a three to five year time horizon. They have narrowly focused finance objectives. They’ve got potential debt, they’ve got covenants, and they’ve got restrictions. They’re racing down the road, but a lot narrower than a private company. A public company has financial objectives and the outside world looking at them. And, that’s a whole unique spotlight and it takes the focus off of different things and it keeps the company driving, but it’s driving toward the bottom line. But, at the end of the tunnel, at the end of the road, what the final objective is, may not be necessarily well defined as it might be for a private equity company.
Zezas: That makes perfect sense. With that now, let’s talk about the role of the CFO. You’ve got three different company types, run differently. I’ve got to believe the skills required and the expertise and role of CFO in each of those verticals is vastly different. Is that true?
Alpert: Absolutely. Let’s take the role of the CFO in public companies that’s not the easiest job, but is the easiest to describe. A public company finance team has got reporting requirements, has got SEC requirements, has got heavy budgeting responsibilities, and they’ve got accounting functions. Therefore, the CFO is much more focused on the financial function than the whole body, the whole enterprise. In a mid-cap company or a private entrepreneurial company, the CFO has to be a jack-of-all-trades, a master of many.
Zezas: A master of many?
Alpert: A master of many. He has to draw on his own network to supplement his own team and the company team because he’s operating in a small environment. And, it’s very much a close team environment. The finance guy has got to work with sales, marketing, operations, logistics, and human resources. He’s working with a team, he’s building a team, and he’s working on bringing a company to the next level. There’s a financial component to all the sales decisions and marketing decisions. And, the finance guy has to be proactive there and not only saying, “this is what we can afford to do” or “no, you can’t do that”. He’s working with his team on ways to do that within the financial constraints that the company has to operate within. He has to have his fingers in every piece of the pie.
Zezas: Yeah, it sure sounds that way and it sounds to me that in the privately-held and the private equity held companies, the finance executive is so diverse that he or she is probably like a COO versus being a publicly-held CFO. The focus is much more narrow and probably not as exciting.
Zezas: So, in that COO capacity, the CFO has to be very diverse and you specifically mentioned sales and marketing. I’ve always known you as a diverse finance executive. You’ve always demonstrated the belief that finance and sales and marketing should be aligned. Help me understand how that all works.
Alpert: At the end of the day, revenue is the growth driver. The finance guy is responsible for making sure it’s profitable revenue, but at the end of the day it’s revenue. And, how do you gain revenue? The guys at the front line are your sales team and your marketing team. The finance guy has got to support that team. He’s got to be a player in there, he’s got to understand it. I was fortunate in my career to move from finance to marketing. And, I went out on the road with my sales guys and presented marketing and sales plans to liquor salesmen at eight o’clock in the morning in a little room in a warehouse in Memphis, Tennessee. Once you’ve done that, you know what your guys are doing on the front line and makes you far more sensitive on helping them seize opportunities. Say yes and say yes this way. Also, keep them within the focus and the guidelines of the company, but make them look like the heroes, they need to be in order to drive the bottom line and to grow the company.
Zezas: Now, I’ve heard you use an analogy about skeet shooting and sales and finance. I’m not sure I got that.
Alpert: In an environment, a CFO in a lot of ways, is like an armor. In skeet shooting, you’ve got your sales, marketing, and CEO out there with the shotguns and the rifles taking aim at the targets. You’ve got someone there loading the weapons, selecting the proper ammunition. You’ve got another team player shooting the disc and that group has got to function as a coordinated team so when the disc goes up, everybody’s tracking that disc and the rifle is going to discharge and you hit the target. You move on and you’re ready for the next opportunity. It’s a key role, but the CFO has got to know how to shoot the gun. He’s got to know what his team is thinking. He’s got to feed them the information and ammunition needed to hit that target.
Zezas: So, the salesman and the CEO are the shooters. And, the CFO is what you called the armor, or the one who is loading the gun with the right tools, with the right ammunition.
Zezas: I’ve always appreciated that analogy. John, we’re almost out of time. We have time for about one more question. Given what we’ve discussed today, help me understand what the superior experienced CFO should be thinking about and doing on behalf of his or her company, so the company can achieve success.
Alpert: Well, the core financial function, or the core reporting, is information. Information is power. Information is only power if you get it in the hands of the users. If the finance guy is a full member of all the other aspects of the enterprise and is a respected member of that, which means he’s earned his way on to those teams. He’s feeding them information, he’s seizing opportunities.
Zezas: He’s an active participant.
Alpert: And, he’s an active participant. He’s helping to drive sales and he’s making sure those sales are profitable. He’s putting the ammunition in and he’s putting the guns in the hands of the front line and he’s in the trenches with his troops making sure it happens. And, he’s on the front lines making sure the informational flow and he’s in between the investors and the operational team, then the CFO is going to be successful. The CFO is going to be a full member of the team and he’s going to drive the growth and the profitability that the team needs.
Zezas: Team player.
Alpert: Team player.
Zezas: Words to live by.
Zezas: John, this has been wonderful. Thank you very much for your insight and sharing your knowledge and experience with us. I hope you’ll come back and see us again on CFO Studio.
Alpert: Absolutely. This has been a lot of fun. Thank you, Andrew.
Zezas: Thank you very much. This is Andrew Zezas with Jonathan Alpert at CFO Studio, saying thank you for watching. We’ll see you again.
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