How the CFO Plays a Pivotal Role During a Liquidity Event

Mark Greenough

Mark Greenough

By Mark Greenough

I was having a great dinner recently with a CFO friend of mine as she was lamenting the lack of potential for a liquidity event for her and her company.    I couldn’t believe my ears or perhaps it was the excellent brunello that got me a bit riled up.  According to Thomson Reuters/National Venture Capital Association, there were 211 exits of venture backed companies in the U.S. via acquisition in the 1st half of 2010.  This is on pace to be the largest number in recent memory (2008 and 2009 had 335 and 262 respectively for the entire year).  The market has finally opened up; the time to sell has not been this good in a decade.

I asked her a series of questions and discovered she had done very little to create ANY opportunity for an exit.

  • Had she identified strategic candidates as potential buyers?
  • Did she know who led the business development group for those candidates or who their investment bankers were?
  • Did she know the financial metrics that her company should reach or exceed in order to be more attractive?
  • Was their strategic and tactical plan oriented to achieving these metrics?
  • Did she have professional advisers (investment bankers, accountants, attorneys) who could augment her team in the event of a potential sale?
  • Was her own house in order?  That is, could the company withstand the due diligence?

My friend’s circumstance is not uncommon.  We so often are concentrated on managing the current tasks with limited resources that it is difficult to take the time or have the discipline to look for the ideal exit.  However, a good CFO is always on the lookout to maximize shareholder value through a profitable sale.

As a post mortem, my CFO friend got all fired up and has set up a program to make sure she knows the answers to the above questions.  Her CEO has already contacted me to thank me for pushing her to the next level.  That evening I sidled up to a very nice 20+ year old single quinta vintage porto on the good news.

Mark Greenough is President of Greenough Consulting Group, a Northern California based firm providing financial consulting and services to emerging and middle-market companies as well as to private equity firms. He can be reached at [email protected] or 650-548-6900.

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