Talking Tech & Transformation Series: Interview with Markus Nagel

“Today, a CFO must think and act much more like an entrepreneur.”

CFOs play a vital role in organisational journeys towards digital transformation, elevating business performance, fostering strong leadership, and establishing a robust financial foundation to support and sustain these efforts.

La Fosse Executive’s Will Setterfield (Senior Consultant) sat down with Markus Nagel to discuss this, as well as the changing role of CFOs and future challenges. Markus shared his thoughts on how CFOs must pivot to focus more on strategic support and operational involvement, and how demand for Finance Operating Partners is growing.

Could you give a brief introduction for those that don’t know you?
I’m German and moved to London in 2010. My professional life has been in finance roles, either with operating responsibility or within a PE house. For over 20 years, I’ve had a private equity background, and have moved up through various finance positions to several CFO roles. I’ve managed multiple exits, refinances, and shareholder integrations. I’ve been on both sides of the table, either as an operating partner in PE houses or as a CFO in portfolio companies.

How do you think the role of the Private Equity CFO is evolving?
The role has changed significantly over the past 20 years. It used to be more of a narrow focused finance role – focused mainly on core accounting and core FP&A tasks, and more focus on operations and tactics than on strategic tasks. Now, the CFO’s role is much broader; increased strategic support, managing a much broader stakeholder environment and wider operational involvement into areas such as data analytics, commercial finance, vendor analytics, or ESG just to name a few.

Today, a CFO must think and act much more like an entrepreneur. And as the number two in an organisation, they must connect to all parts of the company, providing insights into performance, both retrospectively and prospectively. Increased business volatility has shortened the average holding period for PE investments, making the CFO’s role more dynamic and fast-paced.

Do you think too much is expected of the current CFO?
In some areas, potentially yes. The attrition rate for CFOs in PE-backed companies is quite high, possibly the highest in the C-suite. PE sponsors often demand detailed, multi-layered data analysis, which can be overwhelming, especially for first-time CFOs. Managing stakeholders and presenting data quickly and comprehensively adds to the pressure. PE sponsors often need to drill down into multiple levels of finance data. This level of scrutiny is unique to CFOs compared to other C-suite roles. It’s not as intense for other C-Suite roles, where discussions remain more high-level.

How do you think the role of the Finance Operating Partner is evolving?
Over the past 20 years, I’ve seen this role to be more and more often a part of an operations team in PE houses. Initially, the investment team were leading all investment and operational aspects, but now the combination of investment professionals working together with operational subject matter experts during the investment holding period helps to generate higher returns for investors. The Finance Operating Partner helps to connect PE firm and portfolio companies, offering operational finance expertise and support to all stakeholders.

When I started in this role in 2010, it was relatively unknown, but now it’s in high demand. PE houses recognise and value the need for operational teams to support business performance. When I started, there were very few people in this role, but now, as I transition back into private equity, multiple PE houses are looking to add this expertise at the moment.

What do you think you’ve learned from playing both roles?
Flexibility and a proactive approach are essential. A successful CFO or operating partner should be hands-on and involved in solving problems, not just a passive advisor. Building trust with portfolio company managers by offering actionable insights and connecting them with a broader network within the portfolio is crucial. Coming to the table with a perspective and a can-do attitude is important. Being a trusted partner who can bring in resources, lead projects, and provide the right inputs is key to success. You help find and implement solutions, often leading projects and teams yourself, but always in a support role to the portfolio management team.

What do you think is the biggest challenge of the modern CFO?
Increased volatility is a big challenge. The frequency and amplitude of business cycles have made it difficult to predict and manage. Readiness, both in terms of volatility and potential exits, is crucial. CFOs must be “recession-ready” and “exit-ready” to capitalise on opportunities during turbulent times. Leveraging smart data analytics tools to create insight based on performance data at a granular level is also becoming increasingly important. Creating data lakes and combining them with AI to gain deep insights into business performance is essential. The modern CFO needs to manage these challenges while maintaining operational excellence and strategic foresight.

To find out more about La Fosse Executive and the end-to-end solution we offer, please contact Will Setterfield.