Home Business Insights & Advice Global exec Gary McGaghey explores private equity strategies to help CFOs thrive

Global exec Gary McGaghey explores private equity strategies to help CFOs thrive

by John Saunders
27th Sep 22 12:36 pm

Gary McGaghey is a globally experienced chief financial officer, holding executive positions in international companies across markets ranging from Europe to Africa to the US and Asia. Currently serving as group CFO with Williams Lea Tag in the UK, McGaghey oversees restructuring, mergers and acquisitions, and balance sheet refinancing. As an expert in the private equity space, McGaghey has been attentive to the stock market and its various capitulations in recent months, and is generously sharing his advice for CFOs.

“Great execution always beats strategy, but speed is the most important currency in today’s fast-changing business world,” he says. “Execute with speed.”

As stock markets continue to see rapid movement, the US Federal Reserve has switched gears to selling while raising rates. While the stock market tumbles with the news, private equity continues to act in a more insulated manner. With that being said, as McGaghey would explain, there is a trickle-down effect that will eventually impact private equity valuations. Private equity firms are still enjoying years of stocked-up funds from years prior, but those funds will eventually run out and a reckoning will come to both markets.

As more and more CFOs aim to transition their privately owned and listed businesses to private equity companies, they’ll have to prepare themselves and their companies.

With his outstanding track record of delivering increased shareholder value, Gary McGaghey’s expertise is priceless in today’s executive employment market. Here, he shares his years of experience in the private equity sector.

Learn cash flow requirements

A seasoned CFO will be able to wrestle with their business’s balance sheet, debts, and cash flow — but that isn’t enough in the private equity world. Gary McGaghey advocates for a more comprehensive understanding of cash flow requirements. Debt is often the fuel for company investments and cash flow can be rigorous and demanding.

For McGaghey, these challenges were something to rise above and overcome. McGaghey told IdeaMensch, “I feel there is no substitute for commitment.”

To thrive in the private equity space, CFOs need to grow comfortable diving into what creates both value and cost. Critical data can better be assessed by individuals who are operating from an experienced vantage point, particularly when it comes to culture and information technology.

Said McGaghey in European Business Review, “The CFOs of private equity companies need to very quickly get a firm grip on working capital through deep data interrogation, as PE [private equity] owners expect quick realisation of the cash flow benefits from the optimisation of the cash cycle.”

Prepare for the future

Speaking of technology, private equity firms are at the forefront of progress regarding major industry revelations. Companies can contribute toward significant trends such as digitalisation and urbanisation while also embracing cleaner energy. Businesses and governments focused on achieving climate goals will need to upgrade existing structures and this is an advantageous opportunity for CFOs in that space.

While preparing is essential, it’s also vital to understand that older data reports aren’t always going to be helpful. Inconsistent data reports can leave CFOs looking in the wrong direction, leaving them needing to be able to better read some of the intricate details of operational cash flow.

McGaghey says, “Getting a robust understanding of the drivers of working capital, and the levers to pull in managing it, are often sources of releasing valuable cash.”

Update your data sheets and fact base

Data is the motor that runs the vehicle of a business. McGaghey advocates updating data sheets and maintaining a reliable fact base to create opportunities for future value. Unfortunately, the vast majority of private equity companies aren’t equipped with the proper tools and data sets to make these calls themselves — and the task falls to the CFO.

Private equity owners will demand decisions driven by data and CFOs need to be ready with that information. McGaghey believes that a deep well of analytics and data-driven insights can become invaluable in the tool box of business owners. With the proper data on hand, CFOs can make quick decisions that provide higher value outcomes for their brand and business.

“CFOs of PE-owned businesses need to expect robust interrogation from the PE owners when making strategic and tactical decisions, ranging from pricing decisions to investment decisions,” McGaghey advises. “Having access to deep data analytics with strong data-driven insights is invaluable in gaining the required support from the PE owners.”

Create a well-rounded team

Finding the right members for a team It’s imperative for a business that’s looking to succeed to find the right members for a team. While most CFOs are adept at talent acquisition and management, this isn’t always the case for private equity companies. CFOs must be able to step into these spaces to make quick decisions as an outsider, providing results under varying amounts of pressure.

Gary McGaghey believes that talent acquisition, as well as retention, are among the largest challenges of PE-owned businesses. McGaghey says, “They have to find different ways to attract and retain talent.”

To bring on staff for the long term, focus on offering a job with a clear path forward, the appropriate salary package, and the tools that they need to succeed. CFOs must also be ready to dive into the thick of things to nurture their talent while supporting them in the fast-paced environment the job demands.

Gary McGaghey says of his best traits as an entrepreneur, “The most important factor of my success is I build and work with great people and great teams.”

Focus on innovation and transformation

As their primary goal, a CFO will help a private equity business as it undergoes a successful transformation. During this process, a CFO must define performance, develop metrics, and implement robust strategies. It’s particularly crucial that these strategies don’t overwhelm the PE-owned business.

During this process, the CFO will manage initiatives, create showcases, and assess how the concept will create value.

Gary McGaghey says of leading throughout the transformation, “The CFO of a PE-owned business needs to be able to flex their contributions to create value.”

 

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.

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