Private Equity Healthcare CFOs: Which Type is Right for Your Business?

The need for top talent in the Chief Financial Officer position has never been higher. Great CFOs are in short supply and in high demand. As CEOs, Boards and Investors look to identify and compete for strong talent, defining which type of CFO best matches the value creation plan is vital to securing the right hire.

In this article we explore three types of healthcare CFOs and the skillsets and strategic capabilities they possess.

The M&A Expert

Does your value creation plan hinge upon a successful roll-up strategy? Is synergy realization a vital ongoing activity that will fuel the path to exit? Is your business not yet at a scale where a dedicated team solely focused on corporate development strategy and acquisition integration makes sense? If so, the right CFO type for your business may be an executive with a toolkit honed around full lifecycle M&A.

An ongoing and growing volume of M&A activity – from mergers of equals to roll-up strategies and strategic acquisitions – has placed an emphasis on this type of growth-focused CFO. These highly data and analytics driven executives can add tremendous value through their ability to lead financial diligence processes, buildout financial systems, and integrate operations post acquisition.

Physician practice management businesses, as well as retail-oriented sectors of healthcare – such as Dental and Physical Therapy – are hot spots for M&A-focused CFO talent. These CFOs have successfully grown multi-site healthcare services businesses and established the foundations for true platform businesses. Their differentiated skillset has become increasingly desirable as the volume of sales to strategic buyers in the past year has grown. Should these investment trends continue to accelerate across healthcare and private equity, we expect CFOs with full cycle M&A expertise to become even more desirable and scarce in the market.

The Operator

Could your CEO benefit by having a multi-dimensional, hands-on leader who can lead and impact areas above and beyond Finance and Accounting? Is your business at a stage when adding key positions to the C-suite is more in the future state than the current state? Is the composition of your executive leadership team one that truly needs another experienced, seasoned leader? If so, CFOs with significant operational chops may be best suited to drive shareholder value.

The increasing prevalence of healthcare platforms by investors, created through the mergers of established businesses and the substantial number of physician-led practices receiving capital, has sparked the need for financial leaders that can serve as true business leaders. As a business partner to the CEO and executive team, these CFOs drive value through the development of scalable processes that support business infrastructure. Notable prior experience of operationally focused CFOs include: operating as a strategic partner to the CEO and leadership team, the ability to drive operational improvements and identify growth opportunities, effective partnerships with operations to support data-driven decisions, and the refinement of operating models/building out the functional area.

Looking ahead, the influx of private equity investment into earlier stages or founder/physician-led businesses – driven by high valuations and a competitive landscape this past year – will likely increase the need for CFOs with operational expertise. Often saddled with smaller executive teams, CFOs who can add value across functions and bring overall leadership should be prioritized in executive recruiting processes.  

The Healthcare Outsider

Is your executive team well-stocked with healthcare industry expertise? Does the definition of success for your CFO truly rest upon their industry expertise, or is it other experience and skillset that is vital to their impact? Is the business performing well enough to consider ‘taking a risk’ on a successful CFO with a strong pedigree outside of healthcare? An industry agnostic CFO in the right situation can open the aperture to a better overall talent pool that can serve the business well – with upside potential. 

Not all healthcare CFOs must come from healthcare. Some of the best healthcare CFOs have been sourced from adjacent industries and business models – like education and consumer. This CFO profile is particularly prevalent in multi-site healthcare services. Variation in industry background has proven beneficial to CFO skill development. Whether experience comes from national multi-site retail, direct to consumer services, dispersed or contract workforces, or other business models – experience outside of the healthcare industry can offer differentiated experience in terms of size, scale, and stage of business. While some healthcare businesses may require prior healthcare experience, the current C-suite background, business model and growth goals can support the best athlete hire for even the most complex of healthcare businesses.

Year-over-year CFO executive searches rank among the highest demanded position by private equity and venture capital. Identifying the right type of CFO skillset for your business is crucial to driving shareholder value and growth.  Dependent on size, scale, stage and overall business model, CFO needs can vary substantially. While many CFO candidates offer a hybrid of skillsets and dynamic background, prioritizing the ideal CFO background can ensure the right CFO is hired.   

Interested in exploring which type of CFO is right for your healthcare business? Reach out to JM Search to learn more.

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