TIBCO CFO Tom Berquist often buys his company extra time to head off trouble, thanks to his decade on Wall Street as an analyst researching enterprise software companies. 

Back in his days at Piper Jaffray, Goldman Sachs and Citigroup starting 25 years ago, Berquist forecasted how Microsoft, Intel and other big companies would perform by piecing together information about their competition and macro events that could help or hinder them — things like oil shocks, a rising or falling euro or a looming recession.

"You have to figure out a way to build a mosaic of information about them," Berquist said this week in a CFO Thought Leader podcast. "You're a Wall Street research analyst, so they have to be on guard [when they talk to you]."

Once he transitioned to the operational side, as both a CEO and CFO of software companies, he realized company finance functions aren't typically set up to gather and incorporate the kind of macro and other external data he relied on as an analyst. Instead, companies focus almost entirely on bottom-up data: internal intelligence about sales volume, customer acquisition costs, and other performance measures. 

In other words, companies are typically set up to miss the forest for the trees, potentially leaving them flatfooted when an unforeseen external event — whether good or bad — occurs. 

"Finance always has [this problem] where things are either going better than planned, and now you're scrambling to move fast, or things are going worse than planned and now you're scrambling to cut costs," he said. 

To keep that from happening, he uses a model he built that meaningfully combines external and internal data.

"We still have to scramble from time to time," said Berquist, who joined software and data integrator TIBCO in 2015. "It's not a perfect world, but being able to make a decision about what's going to change the business model before it actually [happens] gives you a quarter or two to get your business sorted out. It's proven to me over 15 years or so to be a universal problem and something I can bring to the table that's really beneficial."

Fungible roles

Berquist has had as much experience as a CEO as a CFO. After being involved in more than 40 IPOs and secondary offerings on Wall Street, he moved to the operational side as interim, and then permanent, CFO of Ingres, a database company spun off by tech giant Computer Associates. 

"It wasn't just the finance function we had to build, because what we actually got [in the spin-off] was the customer list, a group of engineers, and some support people," he said. "We had no sales or marketing people, no G&A of any sort, no finance people, no HR people, no legal people, no facilities. It was truly a project to be managed."

Three years later, he joined private equity firm Vector Capital, which asked him to step in as CEO of Saba Software, a talent management company.

"It comes down to what the private equity firm is interested in having you do for them," he said. "I like the CFO role a lot because I'm financial at heart, and I enjoy the CEO role."

The difference between CEO and CFO roles is operational, he said. The CEO is expected to take chances while the CFO is expected to bring a sober eye to whether the chances are worth taking. 

"Think of the CEO as the accelerator and the CFO as the brake," he said. "Maybe that means the CFO has to be the more realistic one about looking for the payback."

Far more than in public companies, C-suite roles tend to be interchangeable for portfolio companies, he said. It's more common for CFOs to take on the roles of COO or other executive and move back and forth.

"The reality is, in the private equity world, the rules are a little bit different," he said. "They cross over more between the functions. You work heavily not only as a management team but also integrated with the private equity firm. I've run the IT function before, dealing with all the systems stuff. I can cross over to a COO role."

M&A focus

At TIBCO, launched in 1997 to help companies integrate data and software, Berquist is putting his Wall Street M&A experience to work as part of the company's inorganic growth strategy.

In January, TIBCO completed its biggest acquisition to date, involving Information Builders (ibi), to help TIBCO boost its data analytics offerings. It was the seventh acquisition since Berquist joined the company and, like the others, it's a chance for the company to leverage its back-office strengths to get the most value from the deal. 

Like any private equity-backed company, he said, making deals work is about "improving productivity, increasing earnings, applying your playbooks to these acquired assets, and growing EBITDA." 

Berquist divides acquisitions into two types of companies, what he and his colleagues call vegetables and desserts.

Vegetables are older, bigger companies whose growth has slowed, maybe because their software hasn't kept pace with market changes, and therefore their valuations are lower, while desserts are new, hot companies with attention-getting software that can add something exciting to the mix. Their valuations tend to be higher.

"The desserts are the easy ones," he said. "They have cool pieces of technology and a cool development team that can come in and immediately enhance one of our products. They tend to be expensive on a valuation basis, but because the companies are small, they're not that expensive. We may pay five to 12 times revenue for something that's $1 million or $2 million in revenue."

When they buy these types of companies, the deal includes contract language to ensure talent stays on long enough to help with integration.

"They're locked up for a certain period of time," he said. "It can't be for forever, but it can be for a year or two. That gets us to where we need to be to understand the technology."

Berquist considers it a success if the brains behind hot technology companies stay on past their contract dates. 

"We have a bunch of folks in senior positions here that came from acquisitions and went through that process and stayed, which is awesome," he said. "You can always do better, but I think we're pretty good at keeping the people we need to keep."

Although vegetables tend to be less expensive to buy on a valuation basis, because they tend to be bigger, the dollars can be high in absolute terms. 

"We can get these things profitable," he said. "We have natural synergies that come with leveraging our sales and marketing infrastructure, offshore development environment, our G&A. Then we can work on integrating the customers, products, cloudifying [them], and over time cross selling. Because we didn't have to pay as much as a fast growing company, where the risk is higher, it usually works out okay. I wouldn't call them home runs, per se, but I would say there are a lot of doubles and triples."