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Building a World Class Finance Organization/Private Equity as a Stakeholder IMA Detroit ChapterMark Blaufuss January 14, 2014CFO, Metaldyne 1.

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Presentation on theme: "Building a World Class Finance Organization/Private Equity as a Stakeholder IMA Detroit ChapterMark Blaufuss January 14, 2014CFO, Metaldyne 1."— Presentation transcript:

1 Building a World Class Finance Organization/Private Equity as a Stakeholder IMA Detroit ChapterMark Blaufuss January 14, 2014CFO, Metaldyne 1

2 Overview Summary Background Building a World Class Finance Organization Benefits Characteristics How to Get There Challenges Private Equity as a Stakeholder Overview Characteristics Key Success Drivers 2

3 Summary Background Education BA – Michigan State University Professional Services/Consulting Pricewaterhousecoopers Alixpartners Small Acquisition/Roll-Up Manufacturers JPE, Inc. Stonebridge Industries, Inc. Larger Multi-National/Private Equity Backed Axletech International, Inc. United Components, Inc. Metaldyne Summary Background 3

4 Summary Background – Approach Understand the stakeholders of the business Ownership Customers Employees Peers/Management Team Understand role in the organization Expectations of Stakeholders Establish key working relationships Service organization mentality Understand the parameters to work with Resources Relationships Summary Background 4

5 Benefits of a World Class Finance Organization 5

6 Transforms finance into a valued business partner Allows management of the trade offs between business partnering and corporate governance Sets targets for improving finance’s business value Implements innovative budgeting, forecasting and analysis methods Reduces the costs of financial services and improves their effectiveness Identifies the new skills and talents needed to maintain excellence within the organization Building a World Class Finance Organization 6

7 What Does a World Class Finance Organization Look Like? 7

8 Characteristics of a World Class Finance Organization Culture Highly communicative Fact based management/data driven decisions Promotion of insight/team participation Blameless environment Consistently evolving/transforming People Establishing annual goals and measuring against them Cross-training (incl. various departments w/in finance) Job succession Professional development Incentive/Compensation strategies Honesty Building a World Class Finance Organization 8

9 Characteristics of a World Class Finance Organization (cont.) Business Partnering Recognized as bringing value to the organization Fact based assessments Balanced approach to corporate governance Involvement in non-finance activities Cost Efficient Organization Understand cost of the organization Assess/challenge costs, seeking on-going cost reductions Benefits derived from personnel and system costs Engaged approach to outside service providers Benchmark against similar organizations Building a World Class Finance Organization 9

10 Characteristics of a World Class Finance Organization Processes/Systems Automation System reliance Risk based authorizations Documented and defined Data management/retention Reporting Simple and Concise Timely 2-3 day close Bridges with minor “other” Consistency with operational management Building a World Class Finance Organization 10

11 How Do You Get There? 11

12 Adopt a Continuous Improvement Approach Building a World Class Finance Organization 12

13 Assess The Finance Organization Building a World Class Finance Organization 13 People Processes Controls Value Skills & Capabilities Job Satisfaction High Potential Basic Business Processes Exceptions and Inefficiencies Recurring Errors/Issues Identify Key Controls Segregation of Duties Delegation of Authority Value of Deliverables Timeliness of Reporting Overall Cost of the Organization

14 Assessment Tips Building a World Class Finance Organization 14 If someone cannot explain it to you, they don’t understand it Ask who uses the report or information that is being produced What is it used for? What decisions are made on the report/information? Look for manual intervention “I download the report and then make these adjustments to it” Challenge how effective reviews are How often are adjustments made How many follow-up items are done Take people off the distribution “Dye into the system” Ask “what would you change?”

15 Assessment Tips Building a World Class Finance Organization 15 Document your findings in an organized manner Consider using a score sheet/template Helps to record findings consistently Provides a medium to communicate with the rest of the team Template becomes the building block for the next phase – Plan and Design

16 Develop a Plan Tips on Improvement Plans Leverage assessment template/work Be realistic – people have day jobs Avoid ambiguous items – “Improve efficiency” Use measurable data as much as possible Involve the team early and often in the plan Buy-in and alignment of where the organization is going Mix in short term and long term goals Quick wins Establish scheduled progress updates Celebrate successes to keep momentum Building a World Class Finance Organization 16 Plan Development Determine specific goals Create action steps and champions for each goal Establish timing and deliverables

17 Implement Arm champions for success Empowerment Resources Project management 101 Monitor progress Establish monitoring tool “Stop light” chart Set consistent schedule of update meetings Include problem solving/resolution opportunities Be supportive “Pile on” to support requests for information/attendance at meetings Be personal Avoid emails – talk to people in person wherever possible Building a World Class Finance Organization 17

18 Evaluate and Re-Assess Compare actual results to goals Understand drivers to variances Determine the need to keep the item on the plan More improvement to be garnered? Cost/benefit of further improvement Re-assessment Update initial assessment New circumstances/challenges Stakeholder input Continuous Improvement is Journey, not a Destination Building a World Class Finance Organization 18

19 Challenges to Building a World Class Finance Organization Culture Multi-national challenges “This is how we do business here” Distance Language “Tone at the Top” Succession planning/career opportunities Competition Compensation Legacy Systems/Issues Company Performance Building a World Class Finance Organization 19

20 Private Equity as a Key Stakeholder 20

21 Private Equity – Quick Stats Private Equity 21 Quick Facts Private Equity Firms Headquartered in the U.S.: 2,797 firms Buyout/Growth Expansion Funds Currently Fundraising in the U.S.: 320 funds Private Equity-Backed Companies Headquartered in the U.S.: 17,744 Employees Hired by U.S. Private Equity-Backed Companies: 7.5 million Last updated: June 2013. Source: PitchBook, PEGCC Analysis. U.S. Private Equity Investment. Source: PEGCC

22 Private Equity – Here to Stay Private Equity 22 U.S. Private Equity Investment. Source: PEGCC Funds Available for Investment Held by Private Equity

23 Private Equity Characteristics Looking to create value in acquired companies Status Quo post acquisition unlikely Growth Revenue Profitability Investors Attracted to Stronger than Market Returns “Private equity delivers significant benefits to its investors and has a proven track record of outperforming other traditional asset classes. As of December 2012, private equity outperformed the S&P 500 Index by 4.3 percentage points, 5.1 percentage points and 7.0 percentage points for three-, five- and ten-year periods. A review of 151 public pension funds across the U.S. found that private equity delivered an 8.8 percent median 10-year annualized return to pension funds, outperforming the returns of other asset classes (fixed income, listed equity and real estate).” Financially driven people EBITDA/Multiples Leveraged Buy-Outs Typically Non-Operators – Financial Engineers Private Equity 23 U.S. Private Equity Investment. Source: PEGCC

24 Key Success Drivers with Private Equity Remember Who Has Taken the Risk The equity investment is likely substantial in the business Talk the Talk EBITDA Multiples Debt Know Your Numbers Explainable variances Avoid “surprises” Robust budget and forecasting Operate the Operations Seek approval not guidance Communication Establish an agreed upon communication cadence Performance, Performance, Performance Private Equity 24

25 Questions? Mark Blaufuss Chief Financial Officer Metaldyne Corporation markblaufuss@metaldyne.com (734)207-6768 25


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