By Michael Burdick, Paro
Privately owned companies that are bought by private equity firms often experience culture shock. It’s a transformative environment as people with set processes learn new ways to work under the pressure of higher reporting expectations.
After an acquisition, it’s natural to seek ways to tighten the balance sheet and make operations more efficient.
Based on my experience with private equity firms, this involves integrating new processes with teams that might not be comfortable with dramatic change. Legacy companies are often old-fashioned, and they’ve never had anyone shake things up in a meaningful way.
To earn a quick return on investment, PE firms push to create efficiencies and increase profitability in a tight time frame. Turnover in the C-suite is often a given, and you have to balance that out by finding ways to position the company for rapid growth — a task that has shifted thanks to evolving technologies.
The process is never easy for the companies being acquired, but several aspects of the transition present unique challenges for PE firms.
Layoffs, freelancers, departures
Accounting at these companies is sometimes a manual process, with outdated legacy software that might not be easy to update as modern cloud-based offerings.
As you’ve undoubtedly seen with companies you’ve acquired, people can find it difficult to learn new systems. Hiring freelancers in priority areas such as accounting can make it easier to bridge the gap by bringing experienced staffers when you need them.
Nobody enjoys layoffs, but they’re part of the process. Many longtime employees will reject changes or become paralyzed when their company is bought out.
People whose positions are not eliminated must be trained on the new ways of doing things and potentially moved into new roles.
For example, a CFO in a legacy company might be better off as a controller. It’s not because he’s incompetent: He simply might not have the skillset to do a cost-benefit analysis or integrate into another company, and he needs to be reassigned to the proper position.
This sudden change can create instability, causing some talent to leave for new opportunities. Brain drain is a reality in any acquisition, but the on-demand economy presents a viable way to staff up during a transition.
An On-Demand Solution
When thinking of the on-demand economy, most people gravitate toward the Ubers, Airbnbs, and TaskRabbits of the world. But beyond these blue-collar gigs is a wide world of white-collar workers eager for freelance opportunities.
Let’s say you eliminated a company’s core finance team during a recent transition. Instead of scrambling to find qualified hires, you could instead lean on the on-demand economy to provide multiple high-quality finance folks to serve in various capacities during the transition.
In fact, you’re probably already doing this with interim CFOs for short-term engagements. Apply this same concept to the rest of your finance needs.
This outsourced team can quickly establish rapport with stakeholders, tweak and fix processes for accuracy, and reduce month-end close times.
By outsourcing with experienced talent, you’re getting a skillset several deviations above average at a better economic value.
Finance talent can be slotted in and out throughout the transition process, and it takes a flexible model that can accommodate anything from a 20-year company insider to a reassigned executive. Any gaps must be filled before new efficiencies can be recognized.
A clear focus on goals and metrics is essential to ensuring you install the right talent in the right places and build a high-growth business.
Fresh faces with fresh eyes need clear goals and objectives to be effective. This mindset should permeate the company from top to bottom, ensuring it is primed to grow as efficiently as possible.