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Avoidable missteps by rollup CFOs, with BDO UK

How much to outsource. How not to lose sleep over ERP. How to scale the Finance function in a serial acquirer.

RollUpEurope is proud to collaborate with BDO UK for the Serial Acquirer CFO Workshop. On 14 March 2024 in central London, we will be bringing together a small group of senior finance executives for networking and learning.

Ahead of the workshop we sat down with Carly Bleathman, a Partner with BDO UK who specialises in supporting finance leaders to build best-in-class finance functions. Given Carly’s two-decade track record both in industry and practice as Group Financial Controller for an AIM listed business, a Project Accountant focusing on pre-IPO work and listing, and as Finance Director of a high growth private equity backed business, we peppered her with our favourite questions. 

Configuring the Finance function

RollUpEurope: Serial acquirers are lean enterprises by definition. However, when it comes to managing overheads, that frugal approach isn’t universally applied. There is a propensity to invest in M&A origination and execution capability as opposed to the Finance function. In extremely difficult situations, this approach results in acquirers acquiring multiple assets of frankly mediocre quality, with rudimentary reporting and control systems. Do you have a rule of thumb for outsourcing vs. insourcing the Finance function? And when should a serial acquirer hire a full time CFO?

Carly Bleathman (CB): It really depends on the stage of a rollup’s life cycle and to an extent, what existing resources (if any) and skillsets the finance team has in place from the outset. 

Across the recruitment market there is a dearth of great finance talent – from CFOs, Financial Controllers right through to bookkeepers – so being clear on what you have today and what resources you need in the future is key; map out where the gaps are, and where and what type of outsourcing will add the most value. This will evolve over time, and it’s not uncommon for rollups to scale up in-house resource over time as the business grows in complexity or geographical reach. 

For example, as a pan-European acquirer, you may want to start with a fully outsourced model, using an outsourcing partner to do the “nuts and bolts” accounting, with finance support centrally to coordinate the engagement and manage local filing requirements. That said, we’ve seen rollups launch with fully built out, UK based teams, such as M&A, FP&A, Tax, Accounting, etc. 

We have also seen serial acquirers build offshore shared service centres to support all their acquired companies and to standardise processes and systems as quickly as possible. 

For me, the key determinants of a successful setup are: Firstly, how many times the CEO and/or the Board have done it before; and secondly, the time invested at the outset.

Don’t blame the ERP…

RollUpEurope: Let's talk about ERP. Painful to implement, but impossible to live without. We know serial acquirers that chose not to make the investment, who have later found themselves groaning with pain - proverbially. Imagine acquiring multiple small businesses with zero reporting a priority. Lots of debt, hence covenants to comply with. 

CB: A common mistake is not to plan ahead. An ERP isn’t something you buy after watching a demo. Before purchasing, you really need to spec it out properly and future proof it so that you’re not having to repeat what can be a lengthy and arduous process in a few years’ time. What does my business need, by function and by jurisdiction now and in the future? Another common mistake is retrofitting a legacy process into a new system.

Where BDO can add value is through our experience and positioning by being sat in the middle of the interaction between the rollup and the ERP vendor - ensuring requirements are carefully considered, mapped and articulated with the end reporting and process output front of mind. Too often we see clients asking us to support post-implementation optimisation of existing systems - which we can do - but it’s a cost that can be easily avoided if time and effort is invested upfront in a robust spec of system requirements. 

How BDO UK supports serial acquirers

RollUpEurope: What role does BDO UK play in the value chain? For example, if the CEO asks you, I need to set up the Finance function, but I don't know any CFOs, would you help with that? Would you help with bookkeeping? 

CB: There are many ways in which BDO can support serial acquirers; from M&A, financial, tax and commercial Due Diligence, advice on tax and share structures, through to what I specialise in - building a best-in-class Finance function that can handle both the pre- and post-acquisition challenges a rollup will typically encounter. This often includes a rollup’s ongoing finance function requirements, ranging from preparing financial statements, technical financial reporting advice, monthly reporting cycles through to payroll and bookkeeping. 

Our edge is that we’re a global firm with an entrepreneurial spirit - so we have extensive experience in supporting ambitious entrepreneurs expand their businesses across multiple territories and this is what makes us different from other firms. 

Whilst we don’t directly recruit CFOs for our clients, we do have strategic partnerships with firms who can place interim or permanent CFOs. Above all, we actively encourage our clients to harness our network and ecosystem - making helpful connections and introductions is in our DNA.