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The CFO is an architect of strategy - Yves Regniers, CFO What's cooking? — Transcript

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0:01CFL Studios creates content for CFOs
0:03who want to think sharper, decide
0:05better, and lead with more confidence.
0:09With the CFO podcast, we bring CFOs to
0:11the table for honest conversations
0:13about leadership, pressure, trade-offs,
0:16and the decisions that shape companies.
0:21With CFO Playbook, we go one level
0:23deeper. One CFO, one real case, one
0:27practical masterclass. Through our CFO
0:32articles, we turn CFO thinking into
0:34clear, useful insights for current and
0:37future CFOs. Discover more at
0:40cfo-studios.be. .be. Ladies and
0:50gentlemen, welcome to a new episode of
0:53CFO Playbook. This conversation goes
0:55one level deeper than the CFO podcast.
0:57We focus on one case, one CFO decision,
1:00and dissect the most important lessons
1:02for you. A carve-out is often viewed as
1:06a transaction, but long before an
1:08activity can be sold, it must first be
1:11detached from the existing company.
1:15Which revenue, which costs, which
1:17liabilities belong to the activity, but
1:20also which people, processes, systems,
1:22and contracts must go along? Which
1:28functions are currently shared with the
1:29rest of the group, and can the
1:31carve-out continue to function
1:32independently after the split? That
1:36makes a carve-out much more than just a
1:38financial exercise. The CFO must test
1:41the strategic logic, determine the
1:43financial perimeter, and make
1:45operational dependencies visible. At
1:48the same time, the existing business
1:50must continue to function, and the
1:52organization must be prevented from
1:54becoming paralyzed during the
1:56preparation. In this CFO Playbook,
1:59Efrèn, CFO of What's Cooking?,uses his
2:01experience with the sale of the savory
2:04division to demonstrate how a CFO
2:06prepares a carve-out. Which risks are
2:09often underestimated, and what lessons
2:12can CFOs draw from his experience? The
2:15central question is: how do you, as a
2:18CFO, prepare a carve-out from a company
2:20? This is the CFO Playbook of Efrèn.
2:23Welcome to the CFO Playbook. It gives
2:25me great pleasure to have, let's say,
2:28part two of our conversation. But let's
2:30start at the beginning. Who are you,
2:31and what is your story in a nutshell?
2:34>> I am Efrèn, so CFO at What's Cooking?.
2:36Started 10 years ago at what was then
2:39Ter Beke, which has meanwhile evolved
2:41and transformed into What's Cooking?.
2:44>> And I have been the CFO there since the
2:47Covid period, so to speak.
2:48>> become. Okay. We are going to talk
2:50about a carve-out, but let's start at
2:52the beginning. What exactly is a
2:53carve-out? A carve-out, for me,
2:56actually starts with a strategic
2:58decision. A decision on whether
3:02individual entities within a group are
3:04better off transforming further outside
3:06rather than inside the same group. Uh.
3:11>> So, in this case, it is about the,
3:13let's say, carve-out of our savory
3:16activity. But I think there are many
3:19similarities with other carve-outs. I
3:22have also done another major carve-out
3:24in my past, and the process, in my
3:26experience, is quite similar.
3:31>> But there are very specific focus
3:32points for each type of business. So
3:35what
3:36>> what we are showing here, I think, is
3:37one of the possibilities, but it is
3:39certainly not the only possibility.
3:41>> I see. I am very curious about what you
3:44have prepared for us. Where does it
3:48actually start?
3:50>> I think it starts with the preparation.
3:53And then, returning to that scenario
3:55analysis we discussed earlier in the
3:57CFO podcast,
3:59>> right. Looking at different scenarios.
4:01But first and foremost, the question is
4:03: what is the strategy?
4:05>> Right? What do you want to achieve with
4:07that carve-out? Are other scenarios
4:10possible? Have you mapped out all the
4:14different options, and are there, for
4:16example, dealbreakers where you say, "
4:19this cannot be included in the
4:20carve-out" or
4:23>> similar issues.
4:26>> And then, a part of the preparation is
4:28ensuring that the strategic side is
4:30clearly defined.
4:31>> Yes. And only then, I think, do you
4:34move on to the financial modeling and
4:36analysis. In my view, it is very
4:43important there to have sufficient
4:45detail and run enough alternative
4:47scenarios so that for both parts of the
4:49business—what is being sold and what
4:52remains—you run a model for P&L,
4:54balance sheet, and cash flow. But also
5:01looking at covenants. What does it mean
5:04for dividend capacity, capex capacity,
5:07and so on. And actually valuing and
5:12modeling that for each of the business
5:14units.
5:16>> Okay.
5:18>> And then take a close look at those
5:20sensitivities, whether cumulative or
5:22individually.
5:23>> Yes. To be prepared for each of the
5:26possible scenarios, and definitely do
5:28not forget the dis-synergies.
5:31>> What are those to you,
5:33>> ultimately? That will be different for
5:35every business. To the extent that they
5:39are managed in an integrated way,
5:40certain things will have to be
5:42decoupled. And in some areas, that will
5:45likely mean an additional cost. Okay.
5:50Properly understanding those
5:52dis-synergies, both in terms of costs
5:54and operations, is an essential element
5:56in the modeling phase.
5:59>> Yes.
6:01>> And then you move on to the design of
6:03that separation. And there you will
6:06fully define the perimeter, including
6:09people, contracts, and so on. Further,
6:11right. Because often a company will
6:14have sought to maximize those synergies
6:16at the level of customers, suppliers,
6:19>> um, yes, manpower, let's say. And those
6:24you have to start pulling apart again.
6:26So, properly establishing that
6:28perimeter.
6:29>> and then look at where is a
6:32>> separation or a carve-out simple? where
6:38will some support be needed via a
6:39transitional services agreement or
6:41another solution, and then also develop
6:44a very clear, quite detailed plan.
6:51Which steps must be taken legally and
6:53fiscally to ultimately be ready for
6:55that split of a part of the business,
6:57right? And then you move on to my
7:00following recommended phase. And that
7:03is then really
7:06>> preparing that business. So, ensuring
7:09that the financial data, the data room,
7:12is ready, right? That all contracts are
7:16split and ready. And that you actually
7:20enter a phase of what one calls VDD,
7:22vendor due diligence. determining which
7:26parts we want to have audited ourselves
7:28to support the sales process? Do we
7:32only do a commercial VDD? Do we do a
7:34financial and legal VDD? Depending on
7:40the pool of potential acquirers or
7:42investors, decide on the best set-up.
7:50And then also, very importantly I think
7:52, look at the communication: what do we
7:55communicate, when, to whom, and who
7:57will deliver that communication to make
7:59it run as smoothly as possible,
8:01ensuring the base business and the
8:03underlying performance of that unit do
8:05not suffer.
8:09>> What role, perhaps briefly, what role
8:11does the CFO play in this story? With
8:13everything you have explained? Is the
8:16CFO actually the linchpin to facilitate
8:18all of this?
8:21>> I think the CFO and the executive team
8:23must partly be the architects of the
8:25strategy and also do some of the
8:27preparation. But as you get into
8:31further steps, you naturally have more
8:33people who are involved. Mm-hmm.
8:38>> And the finance department is often one
8:40of the first, together with the legal
8:42department, to be involved in ensuring
8:44data room readiness, that the financial
8:49>> vendor due diligence is done so that it
8:51is ready and you actually have no risk
8:53that figures would change during your
8:55process.
8:57>> Okay, that is clear. Yes, so you have
9:00preparation very clear. What then? What
9:02follows that then? But then I think it
9:06is important that you distill one very
9:08robust scenario and a, let's say, most
9:10realistic scenario to then actually put
9:12forward as a plan.
9:16>> A plan that will then have to be
9:18carried out by the wider business,
9:20right? Not just the executive team of
9:24the group to which the unit belongs. Hm
9:27>> hm. But first and foremost, also the
9:30management team of that part of the
9:32group.
9:34>> Yes.
9:35>> So, I think one scenario that is very
9:38clear and straightforward. Don't make
9:42it incredibly complex, just a very
9:44powerful, clear plan.
9:46>> Yes. And do you, of course, besides
9:50that ideal scenario, also prepare other
9:52scenarios in case things go wrong or
9:55don't work out? Is that also something
9:59included in the preparation?
10:00>> In in the
10:01>> mitigation, so to speak,
10:03>> in the carve-outs I have done.
10:04Absolutely. Yes.
10:06>> Because you have to be able to pivot
10:08during a process. You also need to get
10:11the backing and freedom from your board
10:13of directors to
10:16>> adjust certain things during the
10:18process. Yes, and also run
10:21sensitivities, because ultimately
10:24>> you have to look a bit at the business
10:26you are going to sell as a buyer.
10:28>> Yes.
10:32>> And then see, okay, in every scenario
10:34—growth, slightly less growth,
10:36inflation, you name it, financing—
10:39that it still adds up in each of those
10:41scenarios.
10:44>> Yes, logical.
10:46>> And so, preparing those scenarios in
10:48advance
10:49>> Yes. I think ensures you have a
10:52smoother process afterward, where the
10:54other people involved in the process
10:57>> know the answers to the sensitivities
10:59that might arise in the...
11:01>> Okay, that is clear to me.
11:03>> What do you do then? So you have a
11:04scenario of, okay, this is what we're
11:06going for. What is the next step? So
11:08then, first and foremost, there is
11:10alignment within the central functions,
11:12especially the people managing those
11:14central functions, because this will
11:16obviously have a huge impact on their
11:19activities. So ensure there is
11:23alignment, a high-level view of
11:24resources, and the feasibility of that
11:27carve-out. With an eye toward
11:31continuity
11:34>> for both the carved-out part and the
11:36remaining part.
11:38>> Yes. Once you are there and that
11:42alignment has happened, I think it is
11:44absolutely crucial to align with the
11:46management of that carved-out entity,
11:48and sometimes that management still
11:50needs to be assembled,
11:52>> needs to be formed. Yes. So ensuring
11:56that the plan or scenario is supported
11:59by that team, that there is commitment,
12:05>> and that they support it 100%and take
12:07ownership of it, I think is crucial.
12:11>> Yes, definitely. Okay,
12:13>> but then, of course, you have the
12:15management team who know the plan. The
12:19challenge, I think, is being able to
12:21convey the plan.
12:22>> Mm-hmm. And you can have the best
12:24salesperson, right, who works
12:26incredibly well. The best CEO, uh, etc.
12:29And so on.
12:31>> But an exercise like that, most people
12:34only do it maybe once or twice in their
12:36career, right. So, guidance by
12:42professionals who can ensure that
12:43management meetings with potentially
12:46interested investors run smoothly, that
12:48the messaging is clear and well-aligned
12:50, I think. Requires a lot of
12:55preparation,
12:56>> right. So, uh, rehearse, rehearse,
12:58rehearse,
12:59>> uh, to, so
13:01>> And do you mean the messaging? The
13:02messaging to
13:05>> to investors, right, to get your story
13:07across smoothly and also to be prepared
13:09for potential questions and possible,
13:13>> also tough questions. Because they are
13:17looking at it, of course, with certain
13:19scenarios in mind. So making sure that
13:23those are all known and that people are
13:25prepared for them is, I think, crucial.
13:28>> Okay. Okay. And then, of course, uh,
13:32prove the story, right, ensuring there
13:35is a coherent dataset that aligns with,
13:38for example, your financials.
13:41>> Yes,
13:42>> because often,
13:44>> I also look myself at the financials of
13:46companies that are for sale. One of the
13:49first things you're going to do, I
13:51think, as a CFO, is to look at, okay,
13:53what is being presented to me. How can
13:55I reconcile that with something that
13:57has been audited, etc. And so on.
13:59>> Yes.
14:00>> And how can you easily build that
14:02bridge? Because if that involves 20
14:05different steps, not good,
14:07>> then, well, it's much harder to read.
14:10So, a clear,
14:12>> simple, yet reconcilable whole. Both
14:16for financial data, but also for other
14:18data. That does require a large amount
14:21of preparation.
14:22>> Okay. So,
14:23>> so you've built the trust. What do you
14:25do then?
14:28>> And then, um, yes, you go into that
14:30transaction, right, we’ll skip fast
14:32forward now, because then you will
14:34hopefully find a pool of investors,
14:36right. Then the investment bank
14:41providing guidance must do its work to
14:43ultimately find the best investor for
14:45the company.
14:47>> And then you actually go into a next
14:49phase to look at, okay, how can we now
14:51practically realize that carve-out? And
14:54you do that, I think, primarily
14:55together with the buying party,
14:59>> and depending on their experience,
15:00there can be more or less involvement.
15:06Very clear alignment of how the buyer
15:08and seller see the trajectory.
15:11>> Yes.
15:13>> To then ultimately define the road
15:15toward it, right. What are the
15:18workstreams? Is a transition agreement
15:21needed there? Yes. or no, for how long,
15:26right, what are the possible
15:28alternative solutions, outsourcing or
15:30not, to go through that transition. And
15:35then I think the next very important
15:37step is creating those workstreams,
15:39right. Because
15:41>> are those functional workstreams?
15:43>> Functional workstreams, but I think in
15:45a different context it could also be
15:47perfect. Different plans, depending on
15:50the company, I think. But in the
15:53carve-outs I've experienced, they were
15:56mostly functional workstreams where you
15:59define, okay, finance, legal,
16:01operations, quality
16:02>> etc. Furthermore, a transition is
16:05necessary.
16:06>> Yes.
16:09>> And then actually appointing leaders
16:11who have sufficient knowledge of that
16:12functional domain to provide guidance
16:14from both sides.
16:17>> Yes. And there, "sided" actually means
16:24from the side of the seller and the
16:26side of the one being acquired, two
16:28people in the lead to guide that
16:30transition with the necessary technical
16:32background, letting those people really
16:34create the plan for their functional
16:36domain of expertise
16:43>> with detailed timing, milestones, costs
16:45, and so on, so that they are the
16:48owners of that plan.
16:50>> Yes.
16:54>> But, of course, framed by governance,
16:56where the silos of the functional
16:58workstreams come together and that also
17:00creates visibility on possible links
17:02between the different workstreams.
17:06>> If, for example, IT
17:09>> needs to take a certain action, and the
17:11people in quality can only take that
17:13action once IT has taken step A, right.
17:16That must be synchronized. Must also be
17:18synchronized.
17:19>> Synchronizing, monitoring, having the
17:21governance to actually go through that
17:23and be able to adjust, escalate, and
17:26the like.
17:27>> Okay, super interesting. Um, the
17:30workstreams are hopefully fully
17:32synchronized with the right governance.
17:34What is the next step then?
17:37>> There, I think the challenge is to
17:39become a heartbeat, a drumbeat in the
17:41process, right. So that you stick to
17:44the timing. Mm-hmm. Right, to be able
17:47to continue working together in a
17:49positive way. Even though there are
17:52sometimes opposing interests, and there
17:54the importance of governance during
17:55that process
17:57>> with the involvement of stakeholders
17:59for both buyer and seller.
18:01>> Yes.
18:01>> To ultimately go through that
18:03trajectory, right. Very clear open
18:06feedback, but also escalation options
18:08to be able to find constructive
18:10solutions for problems and thus
18:12actually create a win-win
18:16>> in time, in budget, to realize that
18:18carve-out. Indeed.
18:20>> Okay, very clear. I am super happy that
18:23we did this. I might want to end with a
18:25very crucial question for the CFOs who
18:27might be doing this. What are the most
18:30important two or three tips you have
18:32for them? One, I would say Bright, is
18:35preparation, preparation, preparation.
18:38>> It doesn't start at the moment the
18:40carve-out begins, it starts
18:41>> much earlier.
18:42>> With the housekeeping, right? Ensuring
18:45your contracts are transparent and that
18:47your financials are clear.
18:51>> That you very clearly have all those
18:53data points available, and that you can
18:55still address any potential
18:56shortcomings.
18:59>> Yes.
18:59>> Step two, I would say, strategy. Mm-hmm
19:02.
19:03>> Know what goal you have in mind. And
19:07think three, good guidance, because
19:09that is crucial. Good alignment with
19:13the investment bank guiding you or
19:15other advisors, people who do the
19:16vendor due diligence.
19:20>> Good guidance, very clear communication
19:22during that preliminary process.
19:24>> Fantastic.
19:25>> And preparation is 80 to 90 percent.
19:28>> Yes. Yes, that's clear.
19:30>> Prep, prep, prep. Let that be clear.
19:32Here. Thank you. It was a very good
19:34conversation.
19:35>> Thank you, Bright. Ladies and gentlemen
19:37, what this playbook makes clear is
19:39that a carve-out with a potential buyer
19:43. It starts much earlier. The CFO must
19:48first determine exactly what is being
19:50split off, what value is truly being
19:52transferred, and which financial,
19:55operational, and organizational
19:56dependencies must be broken. In doing
20:01so, not only must the carve-out be made
20:03sales-ready. The company that remains
20:06behind must also be able to continue
20:08independently and stronger after the
20:10transaction. A successful carve-out
20:14therefore requires more than concrete
20:16figures. It requires a sharp perimeter,
20:19reliable data, clear responsibilities,
20:22and a realistic view of the costs,
20:24risks, and future operations of both
20:27companies. The CFO brings those
20:30different dimensions together and
20:32ensures that a strategic decision also
20:34becomes executable. Thank you for
20:36watching this playbook. See you in the
20:39next episode. Next week in the CFO
20:45podcast. Seppo Parvi. CFO of Stora Enso
20:49. Being a CFO can be lonely. Not
20:53because you're alone. Because the
20:56decisions you face are often complex,
20:58sensitive, and difficult to discuss
21:00openly. That is why we created the CFO
21:04network. A trusted community for CFOs
21:07and finance leaders who want to meet
21:09the right people. Exchange ideas. Ask
21:12sharper questions and learn from each
21:14other. Not more noise, just a better
21:18room for CFOs and finance leaders who
21:21want to grow, connect, and lead with
21:23confidence. Join the CFO network for
21:26free at cavios.be. be

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