The evolving role of the CFO: key takeaways from Bowmark's latest forum

Bowmark’s 2024 CFO Forum brought together finance leaders from across our portfolio to discuss the opportunities and challenges facing CFOs of fast-growing, tech-enabled businesses, against the backdrop of an increasingly dynamic environment for mid-market companies.

Evolution of the M&A landscape

Buyers of technology and services companies are now placing a premium on capital efficiency, as is evident from recent M&A transactions. Cash EBITDA is king and there is a renewed focus on fundamentals and ROI. In addition to growth and margin, resilience in the form of scale, recurring revenues and cash conversion are also now key valuation drivers in tech M&A, according to Dan Gallagher, Partner and Head of TMT at PwC. CFOs need to demonstrate that their businesses have these foundational strengths and create a comprehensive, data-led narrative that showcases their value proposition to potential investors. Due diligence processes have become more transparent – and CFOs need to harness the technology and data to evidence their organisation’s strategic acumen, as well as demonstrable ROI from investment in new product development, salesforce effectiveness and other areas.

Exploiting technology for strategic agility

The impact of AI will be profound for today's finance leaders, though CFOs must navigate the excitement associated with AI with caution, neither believing the hype nor underestimating the opportunity. Well-timed, strategic AI adoption is essential to avoid the pitfalls of early integration. Instead of rushing in, Jonathan Morris of Imperem outlined how organisations’ current focus should be on deepening their understanding of AI’s impacts and its practical applications in their operations. They should also be investing in the underlying data technologies, hiring specialist talent and integrating data scientists into their teams in readiness for AI implementation over the next two years.

In contrast, the need to address cybersecurity as an urgent boardroom priority cannot be understated. We are in a critical period, during which the right investment in data and expertise will enable organisations to build defensive moats to safeguard their digital and operational integrity.

The imperative of a data-driven culture

Today every company is essentially a data company. CFOs should take the lead in embedding a data-centric ethos throughout the organisation, to improve forecasting accuracy, enhance operational efficiency and uncover new growth pathways. This ethos requires CFOs to establish a comprehensive data framework tailored to their company’s needs, which integrates descriptive, diagnostic, predictive and prescriptive analytics. “By embracing data and advanced analytics, the CFOs of private equity-owned businesses can drive performance, enhance exit readiness and instil confidence in pricing strategies” said Chelsea Wilkinson, CEO of DataDiligence.

Preparing for a successful exit

Being “exit ready” requires a CFO to champion early planning and ensure that a sufficient track record of data is available and embedded in the business, according to Andrew Howson, Transaction Services Partner at BDO. He believes we will begin to see autonomous AI-powered analytics platforms that can deliver rapid insights in deal processes. Having high quality, detailed datasets is therefore a necessity for both process efficiency and to maximise value.

Bidders already require comprehensive data cubes with at least three years of granular revenue data – by customer, vertical, sector, module, product, time and geography – enabling an independent interrogation of customer behaviour, product performance, market positioning and customer profitability… and this is just the starting point. Looking forward, due diligence will increasingly require deeper datasets spanning a broader range of areas, including ESG and AI strategies. Jat Soomal, CFO of Pirum, a global leader in automated post-trade services, explained how creating a comprehensive, data-supported narrative was essential for meeting investor expectations when the company secured Hg Capital as a new investor alongside Bowmark.

Conclusion

The forum showed how the CFO can play a pivotal role in leveraging technology and data to enhance strategic decision-making, create competitive advantage, improve efficiency and support independent evaluation by discerning buyers.

It also highlighted the leadership role of the CFO in fostering a robust, data-driven culture. It is imperative that finance leaders champion this organisational shift, which is essential for both value creation and delivering a successful exit.

Looking ahead, CFOs will need to innovate and adapt further, harnessing the power of emerging technologies to drive strategic decision-making. Bowmark will continue to provide essential support and insights to finance leaders, to help them navigate this transition and shape the evolving landscape in the technology and services sectors.