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Where’s the ‘F’ in CFO? 9 Aug 2011

What's the most unusual non-financial job that FDs and FCs end up doing? A few years ago, I asked that question of the readers of Real Finance, and the answers were amazingly varied. Test driving new fleet cars, negotiating supplier contracts, handing out staff presents at Christmas, reviewing legal drafts, chairing disciplinary panels - even re-filling the towel dispensers in company bathrooms.

Then there are a host of other FD duties that don't even fall under the label "unusual", but which don't feature in the boilerplate job description. Board responsibility for HR, for example, and IT. (Let's leave the "softer" skills to one side, for a moment - we've covered them on this blog a lot of late…)

They're both huge issues for any business. Both fall to FDs thanks to their history. Long before appraisals and diversity were corporate issues, payroll was the core function of HR - and that's a financial transaction. Equally, the first IT systems handled the accounts - and even today, the core function of ERP systems is accounting and financial reporting. No wonder, as the vogue for board-level IT directors recedes, FDs are again becoming de facto Chief Information Officers.

(I was chatting to Jim Buckle over at LoveFilm the other days. He's a bit of a poster-boy for mid-market PE-backed finance execs, having taken the business from humble beginnings, through PE ownership and now into the corporate arms of Amazon. Relatively recently, he went from being CFO to Chief Operating Officer. At which point, he dropped HR and legal services from his remit! Sadly, his PA is in charge of facilities management - so he still gets roped into those discussions…)

Most FDs I talk to kind of love this multi-faceted role. (And it's one of the reasons I love talking to mid-market FDs and FCs more than FTSE 100 ones. They're lives are just more interesting.) But there is a danger: where does finance itself fit in to this polymath existence?

Well, of course, it's the buy-in, the FD's ante in the game of boardroom poker. Mess up the accounting, reporting or planning, and no amount of clean towel dispensers or network uptime is going to save you. That's more true in PE-backed businesses than anywhere else, too. Of course investors want the HR function to have that bit of rigour and strategic integration that an FD brings. But not if it means your cash-flow forecast is getting soft.

So while the accountancy institutes probably ought to step up the CPD options for senior finance folk to include some of these other functional areas - and there's lots of management thinking about carving out a "FD" role, rather than just a senior accountant role - it's vital to remember that there is an 'F' in CFO. The rest of the business (and its investors) will never ('F' in) forget that.

Deals of the day

A quick look 'down under' for news of the sale of MYOB, the financial software maker that's now up for sale by Archer Capital and HarbourVest Partners. They bought the business in 2008 for A$450m and hope to reap A$1bn with potential interest from Bain and KKR. It's notable because the acquisition happened in the depths of the financial crisis - and the acquirers still stand to make a packet. Proof that even when deals are done at "unfashionable" times, there's money to be made from solid businesses generating good profits (in MYOB's case, A$100m EBITDA).

Liquidity alert: can this private exchange succeed?

One of the tenets of mid-market private equity is that firms like to take a controlling stake and jealously guard it until exit. But the launch of a new trading platform for privately-held shares could result in the model being tweaked. FirstPex will run auctions for equity in private businesses, opening the door for partial exits. Well, in theory. It's perhaps more interesting for managers with vested share options - I can't see many PE houses shifting small stakes this way. But founder Patrick Gruhn reckons that in the US the secondary market for private company shares is worth $7.1bn. So you never know...