For a first-time CFO, the early months on the job are bound to be hectic — even when the company isn’t about to go through a massive transformation.
When Max Krakowiak was promoted to CFO of PerkinElmer in September 2022, the company was a mere eight months away from a divestiture of its oldest business and a rebranding of its other, more growth-oriented divisions.
He’d been at the company for four years, so there weren’t necessarily major surprises in graduating to the top finance seat. But it was a $2.6 billion, publicly held company in a complex industry, and there was a lot to do in a short space of time.
The sale of what had been PerkinElmer’s analytical instruments division, for $2.6 billion to private equity firm New Mountain Capital, was completed in March 2023. At the same time, the remaining public company’s name was changed to Revvity.
Revvity has a diagnostics division that sells specialized instruments laboratories use to measure, analyze or detect biological samples, accounting for 50% of its revenue. The company’s life sciences division, which sells reagents, consumables, services and software to pharmaceutical companies, accounts for the other 50%. About 80% of the company’s total revenue is recurring revenue.
In essence, the company sells instrumentation used to diagnose diseases, and products and services used in the development of treatments for the diseases.
Krakowiak is a fast mover. At the time he replaced outgoing CFO Jamie Mock at PerkinElmer, he was barely a decade removed from his Fordham business school graduation and subsequent admittance to General Electric’s famed Financial Management Program. He worked at GE, becoming executive manager of the corporate audit staff, until joining PerkinElmer in 2018.
Max Krakowiak
CFO, Revvity
First CFO position: 2022
Notable previous companies:
- PerkinElmer
- General Electric
This interview has been edited for brevity and clarity.
DAVID McCANN: When did the transformation plan begin to percolate within PerkinElmer? It must have been well before you became CFO.
MAX KRAKOWIAK: Yes, the plan was set out around 2016. At that point in time, our life sciences and diagnostics businesses were subscale. We needed to bulk them up in very specific areas, and so we went on an acquisition spree, first on the diagnostic side, and then later on the life sciences side as a result of COVID.
COVID actually helped us accelerate the transformation, because we came out with some testing solutions that generated incremental cash flows that enabled us to accelerate the acquisitions. Once we scaled up the life sciences and diagnostics businesses, we knew we had enough size to divest our analytics business.
What was gained by doing the divestiture?
KRAKOWIAK: One reason was that the company operated two very different business models. On the life sciences and diagnostics side, it’s really a “razor-razor blade” model, where most of our revenue [is recurring and] pulled in through the instruments we sell.
The analytics business was heavy on [one-time transactions] and third-party-managed services. It was not part of our core business strategy or business model.
Second, the businesses had very different financial profiles. The analytical business that we divested was much more working capital-intensive, had much lower margins, and had much lower growth. It was almost like hand-to-hand combat in a very commoditized market.
The life sciences and diagnostics business was the flip of that from a financial perspective: super cash-flow heavy, super high margin and faster-growth areas.
There were no synergies between the two businesses.
How intense was that experience? When you became CFO the transformation plan was set to come to fruition in a few months.
KRAKOWIAK: One of the big challenges was prioritization, because of having to run a company while managing what I’ll call this “extracurricular activity” the divestiture. We had check-ins with leaders, what the software industry calls “scrums” almost every other day to make sure everyone was focused on the most critical things and we weren’t overburdening teams with [other] stuff.
We were under such a time crunch, that we couldn’t afford to have anybody running in the wrong direction.
Another challenge was the disentanglement of the business being divested. It was the oldest part of our portfolio, and a lot of our business processes and systems had been designed for it. You have to decide which worksites are going with which company, where people are going to land, where the systems go and who owns which contracts — and there are a lot of politics and emotions tied in with all of that.
What areas was the finance team most focused on?
KRAKOWIAK: One was the financials, which had two dynamics. First was the actual pricing of the deal. The second was around the QoE, of “quality of earnings,” which is the representation of financials for the business being divested. For example, there’s a lot of allocated cost — how much of the facility charge does each company get on a percentage basis? What are the shares of the shared services costs? All of that was a lot of work for the finance team.
Another focus was on system cutovers. You can’t have both companies operating out of the same systems. So that cutover to create a separate environment was a heavy area for finance, as well as making sure the ERPs and consolidation ledgers were all separated appropriately.
Then there was the working capital settlement. That’s a pretty standard process in divestitures. This one in particular was complicated because in order to facilitate the deal, we gave [the acquiring PE firm] extended payment terms.
What was the biggest challenge after the split was executed?
KRAKOWIAK: Where I spent a lot of my own time was on communication and travel. We had to communicate “what is Revvity” to our internal stakeholders, our customers, our vendors and our investors. We worked on our communications strategy and I got myself on the road with each of those stakeholder groups and spent time with them.
Second, even after the deal closed, there were still trailing service agreements that had to be executed to completely separate the companies. The majority of that exercise is now completed, but for the first 12 months, it was a heavy lift.
A third area was around rebranding activities regarding Revvity. There’s a lot that has to happen from a treasury and tax perspective. You have to rename all of the bank accounts [for treasury purposes] and the legal entities [for tax purposes].
And then you have to get your customers and vendors to start referencing the correct new bank accounts. That is a significant process and one they do not like to undergo. In fact, I would argue that it’s probably one of the most underestimated aspects of any divestiture.
What other changes did you have to make?
KRAKOWIAK: One was around setting the right budget levels. When you go through this amount of transformation, there are always unknowns and surprises from a budgeting standpoint. So when we set our annual budgets, we have to provide ourselves with more flexibility so we can have trade-offs and everything is not static.
Another one was around cash repatriation. We historically have not really had to worry about moving cash from overseas back to the United States. But with this deal, most of the [acquisition] cash was sent to our foreign affiliates based on how the private equity firm wanted to set up the organization.
With U.S. interest rates being north of 5%, and given our desire to repurchase shares, we needed that cash back in the U.S. We also had a bunch of expiring debt in the U.S. that we needed to pay off. So, one of the biggest things we focused on was setting up those pipelines for cash repatriation.
