What skills and experience do private equity firms look for in an FD appointment ­ and who is likely to make the grade? The good news is that there are plenty of new opportunities being created every day. Almost without fail, when a private equity firm invests in a business for the first time, they will need to hire a different kind of finance director.

The FD who has grown up with a privately owned business is unlikely to be able to respond quickly enough to the extra demands of high gearing.

PE-backed businesses have challenging financial targets to deliver. A typical deal can take up to six months to complete and it is very normal for management to have taken their eye off the ball while going through the process. The FD is therefore critical in re-focusing management to ensure every target is delivered.

Getting into private equity can be a Catch-22 situation ­ ideally you need to have PE experience to make the top of a shortlist and, generally, relevant sector experience. External investors only have a few years to realise their investment, so although the right FD is critical, the PE house can find long notice periods a problem ­ immediate availability is therefore a definite advantage.

PE clients want someone who has been in the number one financial position ­ a financial controller is not enough ­ and someone who can demonstrate a ‘shirt-sleeves rolled-up’ style of operating. Unless their sector experience is very strong, someone from a large corporate or PLC background is rarely considered, particularly if they have had the support of very large teams.

Candidates need to have generated increased cash and profits in their tenure. Anyone who has seen profitability drop in their time, no matter what the reason, will almost certainly be discounted. Private equity clients invest in businesses which they expect to grow ­ a track record of living through growth is important.

Critically, an FD should have directly managed banking and investor relationships and be able to handle the critical exit stage. They need to be calm under pressure and comfortable with banks ­ ideally taking a business through a tough time, used to daily cash flow pressures and good managers of working capital. They also need to be good communicators and prepared to communicate regularly.

They should be able to spot any bad news in advance via good early warning systems and strong forecasting abilities. These candidates will be talking exactly the same language as the PE houses.

A surprise to many candidates is the speed with which FD appointments are made. Approximately half of FDs are appointed pre-deal ­ typically these job offers are made subject to completion, just two weeks before finalising the deal. The other half of appointments are made where an investment is either not performing to target or where the FD is failing to deliver the information the banks and investors need. In this case, they need to replace an FD as quickly as possible.

The real attraction of private equity is the ability to take a stake in the business which, if things go to plan, could be very valuable within a relatively short term.

A typical FD salary in a PE deal is around the £100k mark ­ often this can mean taking a drop in basic salary, for people used to working in larger businesses or corporates, but with the expectation of seeing a sizeable return on investment.

The FDs we place are generally expected to raise between three and six months’ salary to invest, usually through a mortgage or bank borrowing. Many FDs will have been paid off from a previous job and use some of the pay-off for their investment.

As one director said, this level of stake is pitched to be ‘enough to get you out of bed on a cold January morning, but not enough to give you sleepless nights’. If successful, this stake should deliver a return of £1m or more. Of course, it almost goes without saying that the stake can be lost entirely.

One route for directors to enter the private equity market is to go in as an interim, if you can be immediately available.

SandpiperCI, the supermarket chain in the Channel Islands backed by Duke Street, was recently struggling to find someone who would relocate to the Islands. We placed a very high-calibre candidate as an interim, originally for six months. However, after just three months he was offered the job of permanent finance director, a fabulous opportunity.

The challenges for an FD in private equity are considerable ­ but so are the job satisfaction and financial rewards.

Octopus investments

Originally established in 2000, Octopus has £300 million of funds under management and a portfolio of more than 50 investments.

They focus on businesses with a proven business model, strong growth potential and an established management team. Directorbank has worked with them for a year and placed four FDs nationally.

Richard Taylor heads up deals in the north of England: 'I would say that two out of three deals that I see require an FD.

'Bigger deals probably already have the management structure in place. But in the lower mid market, the businesses we are interested in have experienced a period of aggressive growth. The sales team has grown and the operational infrastructure has expanded to deliver these increased orders, all under the leadership of the key individual within the business, the CEO. The financial function often gets left behind, requiring additional resource and experience.

'We need to take a lot of comfort from the financial information provided by the business and to limit the risk when finding FDs. We look to place high quality FDs who have previous experience of operating at this level.

'We are definitely more interested in finding the right calibre of FD rather than focusing on sector specific experience. We also look at whether a prospective FD has prior experience of working with VCs - understanding the requirements of reporting is an asset too. What we don't want is the additional risk of someone growing into the role.'

John Pearce is head of the FD division at Directorbank