Gary McGaghey Shares Advice on How Private Equity CFOs Can Become CEOs

Despite plentiful opportunities for chief financial officers (CFOs) in the world of private equity, it’s not unusual for a successful CFO to step into a chief executive officer (CEO) role. 

However, there are several differences between managing the financial aspects of a company and running the entire business. And CFOs looking to become CEOs often need to adapt their leadership approaches.

Here, we’ll share mergers and acquisitions (M&A) expert Gary McGaghey’s five strategies for developing essential CEO skills. We’ll also share his advice for new CEOs with a CFO background on the M&A process.

CFOs and CEOs: Embracing a Different Mindset

Many CFOs, especially those who have the ambition to lead a company with strong growth prospects, believe they would flourish as a CEO. This is often true for those who have partnered with CEOs, have experience with consistently hitting financial targets, or have backing from a private equity company.

A CFO with private equity experience may already have the transferable skills and credentials to make the move to CEO level. For instance, both CEOs and CFOs use value creation and financial reports to track business performance.

However, McGaghey warns that a CFO must relinquish their commercial and financial agenda when stepping into a CEO position. They must instead focus on building successful partnerships and relationships, embracing risks and inspiring the leadership and wider business. This requires a more holistic mindset than that required of a successful CFO.

Gary McGaghey’s Five Strategies to Develop Essential CEO Skills

McGaghey advises that CFOs looking to move into a CEO role should work on adopting five characteristics that are crucial for success as a CEO:

1. Create a unified vision for the company as a whole. Crafting such a vision will require a comprehensive understanding of the company’s market opportunities. Identifying and building a strong strategy will make aligning your products and vision, and thus meeting your clients’ needs, much easier.

2. Develop and apply a customer-centric approach to all strategies — one that represents your business’ ethos and operations.

3. Emphasise strong values within the company culture, such as encouragement and transparency, to motivate and inspire employees.

4. Recognise the value of a great team — teams that work well together will reap rewards, especially in terms of morale and productivity.

5. Develop professional resilience. Leading a company will involve regularly dealing with all manner of challenges. Being able to anticipate and problem-solve effectively is an important quality for a CEO, and resilience can help CFOs build confidence in their leadership decisions.

6. Embracing risk and instilling this culture in the leadership team - business success is determined through calculated risk taking. This does entail taking unnecessary risks. The CEO and leadership team need to identify and mitigate risk. Avoid risks would usually be the DNA of a CFO, but this can't be a CEO mindset.

Additional Advice for CFOs Aspiring to CEO Roles

McGaghey notes that CFOs looking to become CEOs require ambition, drive, and confidence to successfully make the leap. While CFOs play an important role in a company, a CEO oversees every aspect of a business, from employees to partners and stakeholders. The most effectives CEOs efficiently hone and execute a core strategy that meets several needs at once.

Many CFOS have expertise in strategy, operations, product lines, and client engagements. McGaghey recommends that those who lack this expertise grow their knowledge before applying for a CEO role. Often, the move from CFO to CEO can happen internally. In these situations, having a thorough understanding of your business’ offerings can work in your favour.

Prioritising client engagement and a customer-centric approach is also beneficial. Stepping back from finances to focus on improving the customer experience is an essential change in mindset for a CEO with a CFO background.

Gary McGaghey’s Advice for New CEOs on M&A Processes

McGaghey, who has much experience in global M&A, explains that, in the corporate sector, it is often the M&A team that engages with buyers and sellers (rather than management).

As individuals can get too close during the M&A process, an M&A team can use structured processes that help distance the buyers, sellers, business, and stakeholders from one another.

Though not a rejection of the management team, some businesses can take carve-outs personally during the M&A process. McGaghey suggests incoming CEOs see carve-outs as fresh opportunities for new partnerships and directions.

Conversely, during acquisitions, a company may get carried away and buy out the business for a grossly inflated price. Management teams might hope to cleanly acquire a company (with no strings attached), but this may not entirely protect the business against risks.

Again, McGaghey emphasises that letting an M&A team handle this process can lead to better protection for the company. An M&A team may also be able to better identify the pros and cons of going ahead with the acquisition.

Forming Strong Relationships With Buyers and Sellers as a CEO

McGaghey notes that the success of an acquisition often increases with a strong relationship between the CEOs who are buying and selling. This even applies to listed businesses, where the acquisition process is more formulaic. It’s not all about paying the highest price or impressing with glossy reports, but rather doing everything possible to ensure the leadership team feels eager to join your company.

This is especially important when it comes to small businesses. McGaghey notes that smaller businesses typically want to feel assured that the buyer will retain their model and team and not merge them into a multinational.

McGaghey’s advice for buyers is to develop a connection with the seller’s management team. The buyer must understand and believe in the seller’s management and the business’ story and mission before engaging in an offer.

These softer aspects of M&A can help new CEOs build a good relationship with the buyer, improve internal alignment (and so motivate teams), and ultimately secure a reasonable price. This approach can also help CEOs decrease the chances of an auction situation and competition with other prospective buyers.

McGaghey acknowledges that this acquisition approach isn’t possible with joint ventures, and so these can prove more challenging. As the joint venture evolves, so will the people involved, and a change in personal dynamics can make things tricky to manage. This is why the success of a joint venture depends on the relationship between the two original businesses.

About Gary McGaghey

Gary McGaghey is a CFO with extensive experience in delivering organic and M&A-driven growth for private equity, privately owned, and listed businesses. He has worked across various sectors, including fast-moving consumer goods (FMCG), beverage, media, and pharmaceuticals.

McGaghey is currently the Group CFO of Williams Lea Tag, an Advent International €1.3 billion end-to-end marketing production and business services group. In this role, he manages the company’s commercial and investment strategies.

McGaghey has previously held leadership roles at Unilever, Robertsons, and Nelsons. He has considerable M&A experience in disposal, joint ventures, and more, through work with Pepsi Lipton, Tigi Hair, and European Frozen Foods.

He is also a chartered management accountant in the UK and a chartered accountant in South Africa.

Discover more private equity insights from Gary McGaghey on Medium.