CFO Studio Magazine, Fall 2011
Jonathan Alpert reflects on CFOs in a private equity world
Interview by Andrew Zezas
JONATHAN ALPERT is the former CFO of Beefeaters, Inc. (dba Petrapport), world Gourmet Marketing LLC (dba sensible Portions), and Apple & eve LLC, as well as, his having led JA & Associates. He is a member of the board of directors of the New Jersey chapter of Financial Executives International (FEI) and is involved in other finance executive and business organizations. Alpert recently appeared in a CFO studio interview hosted by Andrew Zezas.
What’s going on with private equity?
Jonathan Alpert: there’s an enormous amount of activity that started late last year and has
continued on to this year. After 2008-2009, when these companies raised billions of dollars and then couldn’t and wouldn’t invest them, activities picked up enormously. They’re buying companies, selling companies, and competing against strategic buyers; and the market has picked up enormously.
Are there any sectors that are particularly hotter than others?
The obvious sector is technology and the internet; we all read every day about Facebook, Myspace, Xanga, 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; that has picked up, and there are lots of transactions. There is a lot of selling, a lot of buying. Private equity firms have kept their portfolios on the sidelines. They are now selling and going after new companies; there’s a great deal of activity.
That’s exciting because we always hear about tech bubbles doing this, but you’ve said that consistently, even through the down economy, consumer products are being bought and sold.
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 and strategically, how are they different today on a company level?
On a company level, entrepreneurial and mid-cap, privately-owned companies all operate with small teams, and are cross-functional, trying to drive growth. The publicly-owned company has a broader time horizon—they can afford to wait next year. A private equity 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, covenants, and restrictions. They’re racing down the road, but it’s a lot narrower for private companies. A public company has financial objectives and the outside world looking at them. That’s a whole unique spotlight, and it takes the focus off different things and 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, the final objective may not necessarily be as well defined as for a private equity company.
Let’s talk about the role of the CFO. You’ve got three companies that 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.
Absolutely. Let’s take the role of the CFO in public companies—that’s not the easiest job, but it’s the easiest to describe. A public company finance team has got reporting requirements, SEC requirements, heavy budget requirements, and 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.
A master of many?
The CFO has to rely 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, building a team, and 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, 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 whatever it is within the company’s financial constraints. He has to have his fingers in every piece of the pie.
It sounds like 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 rather than a publicly held CFO. The focus is much narrower and probably not as exciting.
You’ve always demonstrated the belief that finance and marketing should be aligned. Help me understand how that all works.
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 on the frontline 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 8 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 frontline, and that makes you sensitive to helping them seize opportunities: “say ‘yes,’ and say ‘yes’ this way.” Also, you need to 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 grow the company.
I’ve heard you use an analogy about skeet shooting and sales and finance.
In an environment, a CFO is, in a lot of ways, like the armor of the company. 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’re going to hit the target. Then 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.
So the salesman and the CEO are the shooters. And the CFO is what you called the armor, or the person who is loading the gun with the right tools and the right ammunition.
What should a CFO be thinking about and doing on behalf of his or her company, so the company can achieve success?
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 user. If the finance guy is a full member of all the other aspects of the enterprise and is a respected member, that means he’s earned his way up on those teams. He’s feeding them information, and he’s seizing opportunities.
He’s an active participant.
The CFO is helping to drive sales and making sure those sales are profitable. He’s putting the ammunition on the frontline. He’s in the trenches with his troops ensuring the informational flow; and in between the investors and the operational team—that’s how the CFO is going to be successful. The CFO has to be a full member of the team and drive the growth and the profitability that the team needs. He has to be a team player.
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