CFOs in Private Equity

A recent study by Accordion has sent shockwaves through the private equity world: 91% of CFOs in PE-backed companies report feeling less job security than before their firm received PE funding. This isn’t just a case of nerves – it’s a symptom of a deeper disconnect between PE sponsors and portfolio companies.

Why the worry?

😟 Pressure Cooker Performance: PE firms prioritize aggressive growth and rapid returns, putting immense pressure on CFOs to deliver. Miss the target, and the axe might fall. (They’re with ya til they’re not).

😟 Misaligned Priorities: CFOs without PE experience may tend to focus on long-term stability and risk management, while PE sponsors favor short-term gains and aggressive M&A deals. This clash can lead to friction and uncertainty for CFOs.

😟 Data Disconnect: Accordion’s study found that 34% of PE sponsors felt their portfolio companies weren’t providing them with the right data or reports promptly. This lack of transparency may breed mistrust and heighten job insecurity.

How does this fear translate into real consequences?

😱 Potential Talent drain: Talented CFOs may hesitate to join or stay in PE-backed companies, hindering financial management and strategic decision-making.

😱 Internal conflict: In some cases, the pressure to deliver short-term gains can lead to unethical accounting practices and risk-taking behavior.

😱 Innovation stifled: Fearing job loss, CFOs may be less likely to take risks or invest in long-term growth initiatives.

The study is a stark reminder that communication, transparency, and trust are crucial ingredients for a healthy PE-CFO relationship. PE firms & their FOSs need to:

💡 Focus on long-term success driving toward a reasonable exit: Prioritize sustainable growth over short-term gains and create environments where CFOs feel secure to manage long-term financial health.

💡 Get on the same page by aligning priorities: Open communication and shared goals are essential. Work with CFOs to develop KPIs and strategies that benefit both the company and the PE firm.

💡 Invest in data transparency: Ensure timely access to accurate financial data for both parties. Open communication builds trust and fosters a collaborative environment.

If that 91% number can be cast over the entire PE landscape, the current climate of fear and insecurity is pretty dicey. No doubt that being in a PE backed portco is a contact sport but let’s bridge the divide, foster transparent communication, and build partnerships that prioritize long-term success for both PE firms and the companies they invest in.

#PE #CFO #JobSecurity #CPAcareers #careercoach #PEcareers