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7/30/2019 IxCFO PE/VC PPT
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Challenges
Practices
ixCFO Services P. Ltd.
Operational Challenges & Best Practices inmandate execution: PE/VC investeecompanies
Seemant Shrivastav
Associate Partner
14th December 2012
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Current trends in PE/VC industry
Positioning of Shared CFO
Typical PE/VC investee companies mandates
How to structure/approach such mandate
Best practices
Case studies
Summing up
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Schedule
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Real Estate24%
Software &Services
20%
Health CareEquipment &
Services11%
Capital Goods9%
Consumer
Services8%
DiversifiedFinancials
7%
Retailing
7%
Media5%
Transportation5%
Utilities4%
Sector wise deal size(source: Vccedge)
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PE: 2012 YTD Trends
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Deal Trends
Source: Vccedge
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Trend Analysis
IT/E-commerce losing flavour
Healthcare, Retail, Media and Consumer/ Fast Food
sectors are emerging sectors Bad investments of 2005-2008 haunting the industry
Declining deal counts and values
Too much money chasing too few quality deals
Emphasis on strong due diligence, rigour
Role of finance function in spot light
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Our CFOs can thrive in following scenarios
PE companies with topline up to ` 100-150 crore
Absence of senior finance team or absence of desiredexperience, skill sets
Accounts & finance reporting, hygiene is absent
Lack of systems & processes
Dynamic, evolving environment
Companies slated for investment by PE/VC
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Positioning: Shared CFO
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Create & update 3-5 year biz plan
Introduce, improve MIS reports focussing on Division wise, product wise performance vs budget
Stock, receivables collection with aging
Cash flow (actual & projected)
Balance sheet snapshot
Trend, ratio analysis
Analyse financial performance, suggest improvements by Improving Cash conversion cycle, managing stock, receivables,
WC management
Cost control & optimisation
Putting in place systems & processes
Compliance matrix, exception reports
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Typical PE/VC investee mandate
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Understand the PE funds & management requirement
Create an engagement matrix targeting key focus areasand actionables
Establish rapport with management team, finance team &key stake holders
Be the bridge between management & PE investors
Hold periodic review meets with PE & management
Take course correction measures based on review meet
Last but not least; Hands on approach for all mandates
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Approach for mandate
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Strong technical expertise, including P&L management,cash flow forecasting
Entrepreneurial and self-starting orientation
Develop, execute and focus team on value creation
Risk orientation and sense of urgency
Thrive on change and solving problems
Excellent communication and consensus-building skills tokeep multiple constituencies happy
Ability to manage the company toward the exit thatcreates the most value for the private equity firm
Fortitude: the confidence and resolve to be an advocatefor the management point of view
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Best Practices
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Co. A is an apparel manufacturing company, PE acquired25% stake in 2007 with a mandated exit for 2012. Absenceof good CFO, resulted in lax systems process, poor MIS andthe company underperformed vs peers.
Post assignment in early 2012, we set right the reportingsystem, designed right set of templates for MIS. Identified& addressed issues like production wastages, slow movinginventory, improvement in DSO etc.
All this time we engaged the management, especially theCFO that the whole exercise is for their benefit.
The detailed business plan was finalised with cooperationof finance team and the PE is on course for strategic exithaving appointed an investment banker.
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Case Study: Company A
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Co. B, an early stage startup funded by angel fund hadgiven us a mandate on Ix, Tx & Fx offerings
Company had lost 2 CFOs in a short span of 6 months
and needed to create a business plan for round II offund raising
We were able to understand the business in a shortspan of 2 weeks and create a business plan within 1week
Further a good example of team work wasdemonstrated when Sanjay was able to take over theassignment during my absence
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Case Study: Company B
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Unlike family business, PE owned companies comewith their own different set of challenges
Understanding the pulse of PE & Company
management, their requirements and delivering onthem would go a long way in a mutually rewardingmandate
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To Sum up
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Thanks