Sarah Moores, Director at Liberty Corporate Finance, discusses the issues faced by finance teams early on in their portfolio life

If you are a CFO of a newly acquired PE portfolio company, or indeed you are a PE house with a new acquisition, your 100 day plan will no doubt be lengthy.  Financial management and reporting is likely to be one of the key things on that list and for PE portfolio companies this has some unique requirements:

  • The capital structure requires detailed modelling, often loan notes and bank debt, with associated covenants;
  • Monthly reporting tends to be more onerous, with more detail often required in the financial statements, as well as a need to report on non financial KPIs;
  • Forecasting becomes a regular part of the financial process, both next year’s budget, but with a constant eye on the expected position on exit;
  • Developing a clear history of financials and KPIs is important as these will form the basis on which the business is sold at some point in the future.

These additional requirements can be onerous for an incumbent team, and the modus operandi is often to muddle through, with an ever growing proliferation of models and spreadsheets which become increasingly harder to reconcile and present a growing risk of making a major mistake.  Does this sound familiar?

The key solution to this problem, is to do some early thinking.  And to set the models up from the start that give you the functionality you need.  A model which can:

  • Capture your actuals month on month by either by downloading from the accounting system, or management accounts package;
  • Provide a forecasting engine for the key business units, pulling in actuals as they become available and rolling forward the plan;
  • Pull out information in the key tables and presentation you need for reporting to the board or the bank;
  • Provide flexibility if you make acquisitions along the way.

Setting these models up is primarily a once off investment in time, after which the monthly updates should actually save you time!  But finding the initial time to invest is the problem – it is not something that is often in excess supply early on in a portfolio company’s life!  This is where someone like Liberty can help.

We can provide that extra resource for a few weeks to get your system up and running.  We work closely with the finance team to design the model or models that work for the business.  Having done it many times before we can obviously provide insight and guidance to improve the structure and process.  And we work very much to the principle that a model needs to be usable, not a masterpiece to be stuck on the server gathering (electronic) dust.  While we are always here to help, we expect our involvement to diminish over time as your team evolves to take on the work.  Our fundamental principle are – logical layout, traceable formulae, easy to use and easy to update.

We work quickly and flexibly, so if you think this there is something we can help you with, give us a call to discuss.