Survey found that turnover for CFOs at private equity-backed businesses was high
If you’re a finance director at a company being acquired by private equity, beware.
Traditional chief financial officers will be replaced by their tech-savvy, visionary and entrepreneurial counterparts at private equity portfolio companies, according to a new study by advisory firm Deloitte.
The survey found that turnover for CFOs at private equity-backed businesses was high, with more than a third of those interviewed having been in their position between six months and two years.
Almost half of private equity firms surveyed said they let CFOs go 50% of the time because they fail to understand their role in creating value. Just over 40% of groups do not think their CFOs understand what their role in driving value should be.
One private equity fund manager said: “We’d rather fire and hire the right person than spend too much time and money training somebody else.”
In addition, 75% of private equity fund managers said they will replace CFOs if they don’t grasp the importance of their role in driving value. Many funds replace one in every two of CFOs at their portfolio companies within 18 months of investment.
Deloitte interviewed more than 100 CFOs, private equity fund managers, CEOs and chairs between March and June 2019.
CFOs have come under increasing pressure due to the rising importance of technological innovation and the demand from private equity owners for digitalisation. More than 80% of private equity fund managers and 85% of CFOs said that automation and technology will have a key impact on finance functions over the next 10 years.
“On top of the ‘basic’ and traditional functions of cost management, revenue growth, control and compliance, increased investor and regulator scrutiny has forced them [CFOs] to wear additional hats, making the job more complex than ever,” the report noted.
However, many CFOs are struggling to drive change by implementing new technologies.
On average, less than 5% of respondents believe their current analytic capabilities are advanced. Just 3% think their current state is fit for purpose.
“The sea change brought on by the mass adoption of sophisticated digital technology will create an intelligent, best-in-class finance function where the CFO’s role will be harder, more complex … but also much more rewarding,” Deloitte said.
Source: Private Equity News