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Strategy and innovation

The CFO as a driver of growth.

Mergers, acquisitions, alliances and new collaboration formulas, such as the consortiums promoted by the European Funds, were unthinkable three years ago but today form part of daily life in the CFO's office.
CFO como motor de crecimiento
Strategy and innovation
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Editorial Dept
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5 minutes
10 Jul 2023
Corporates grow both organically and inorganically, but with a common denominator: they require leaders who know how to guide the integration of organisations with different cultures, technological systems and management models.

That CFOs are technically solvent is a given. Now, in addition to guaranteeing the financial balance of the organisation, they are also valued for their leadership skills and ability to translate strategy into numbers. To guide the organisation in the search for new opportunities. The CFO Frontline Report 2023 of the Bankinter CFO Forum paints a portrait of the CFO who is reasonably concerned about the current uncertainty but is also willing to take command of the necessary transformations. And they are always sitting to the right-hand side of the CEO.

The CFO position is progressing in the organisation

The CFO position is progressing in the organisation

The second edition of Bankinter's annual report once again asks CFOs about their professional development. For 43% of the CFOs consulted, their career is progressing, compared to the more cautious vision of last year when only 23% of CFOs were optimistic about their future.

Fifty-three per cent see their development as stabilised and only 4% rate it as “stagnant”.

This progression is related to the greater strategic weight of the CFO and the acquisition of more and more functions.

As stated in the CFO Frontline Report, the Finance area is mostly responsible for Finance, Administration, Management Control, Compliance and Payroll Management. In approximately 30% to 40% of the corporates analysed, the CFO is responsible in addition for Legal, Human Resources, Systems and Purchasing, and, to a much lower percentage, Quality and Facility.

In terms of the core role expected of the CFO, the 2023 barometer reveals that 41% of CFOs are changing their funding strategies. High interest rates and market volatility are forcing corporates to diversify their sources. Alternative investments have entered the scene, as well as the Next Generation European Funds that are being deployed to promote projects that would not have been possible without this injection of finance.

10.30 – Investor Relations

One of the functions that has traditionally fallen under the umbrella of the CFO has been Investor Relations, a role that has evolved considerably in recent years, especially since the pandemic and the various crises we have experienced one after the other.

Institutional investors and fund managers are demanding more transparency and information, as well as seeking more interaction with the CFO and board. The CFO has to guarantee the quality and consistency of the information that circulates between both parties. As Javier Hernández Bermejo, Bankinter's director of medium-sized businesses, points out, they are “able to present themselves with confidence and rigour to investors”.

At a recent forum on finance, a CFO admitted that their most important role on a day-to-day basis was filtering the information sent to the markets and stakeholders in general. One sixth of their time was spent entirely on the relationship with shareholders and investment funds.

At the presentation of the Frontline Report at Bankinter's Madrid headquarters, the CFO of CIE Automotive, Iratxe García, explained how the automotive group had divided her role into three areas: Control, Tax, Financing and Treasury (which she directs), Investor and Analyst Relations, and M&A. Three CFOs for a role that was previously performed by one person.

10.30 – Investor Relations

CFO: The M&A quarterback

“All contexts have opportunities. In M&A we're seeing stagnation and that's an opportunity”, said José Pérez-Mila, CFO of Sprinter, a sports equipment commercial giant, at the presentation of the report at Bankinter.

After moving more than 100 billion euros in 2021, a frantic year for Spanish corporates when some seized the opportunity and others opted for deleverage, operations slowed slightly in 2022. In any case, analysts note that mergers and acquisitions will continue to sizeable quantities of capital.

At the same forum, Manuel Gómez Gutiérrez-Torrenova, CEO and CFO of the energy enterprise Avangreen, advocated for CFOs abandoning “the basic reporting, finance and tax package” to be able to go abroad and generate more business and profitability and, specifically, to detect M&A opportunities.

Another section of the CFO Frontline Report identifies the forecasts that CFOs have on the table, several of which implicitly carry the acronym M&A:

  • They are expecting financial restructuring operations.
  • Some corporates are going to find their opportunity.
  • Corporates with highly leveraged liability structures are going to suffer considerably.
  • By contrast, corporates that can make strategic purchases thanks to their healthy financial situation will be able to improve production costs. The same goes for those with little exposure to energy.
  • Corporates that have sized and identified growth avenues will also be able to weather uncertainty more robustly.

The role of the CFO in these M&A operations encompasses the entire transaction cycle, from the strategy that detects the opportunity to execution and integration, where technology is becoming increasingly important. As a CFO of a Spanish enterprise pointed out some weeks ago, when it comes to integrating and seeking synergies, it's all about the numbers. That's the language teams understand better than anything else.

“The CFO can be the quarterback of M&A deals”, J. Neely, Accenture's global managing director of M&A, tells Fortune magazine. In his 25 years of experience working side by side with CFOs in these processes, Neely has seen the relationship begin with a focus on the numbers and details of the deal, and ultimately end with the CFO designing and landing the future business operating model.

The CFO can be the quarterback of M&A deals

Another feature that is often overlooked is the obligation of the CFO to anticipate possible operations. In the same magazine, Joanne Cheng, CFO of the technology enterprise Jellyfish and with numerous M&As to her name, says it means having your organisation poised to go shopping or present itself as an interesting target.

A study by the University of Liverpool (United Kingdom) that analysed a thousand corporates listed on the London Stock Exchange divided its CFOs into two categories: Influential and not influential. Three or four years after an acquisition, corporates with an influential CFO were far more profitable than those represented by less lofty-minded CFOs. "Influential CFOs are involved in those deals and therefore have the ability to create value from these mergers and acquisitions," the report states.

The faithful gardener waiting for their chance

If we look back at the origins of family businesses in Spain, in approximately nine out ten the CFO is the leading external figure in the management committee. And over time we see how the CFO accompanies and guides the organisation's life cycle, from internationalisation to diversification, inorganic growth and, as the last step, listing on the stock market, with all that this entails regarding new transparency and reporting requirements.

One of the recurring themes at the periodic meetings of CFOs in Spain and other countries is how the progression of this role makes them the natural substitute for the CEO and a future board member. Their strategic profile, ability to drive growth and experience in complex processes such as the ones mentioned here mean that the CFO is a person followed even more closely by investors.

As Mario Lara, director of ESADE's Centre for Corporate Governance, maintains, CFOs are potential future directors.

According to his calculation, in listed corporates 25% of the director profiles come from the finance area. Fifty per cent are former managing directors or business managers, but a third of these are former CFOs. “The day you stop being CFO you have the necessary skillset to go on to have a career as a member of the board of directors”, says this expert.