Following our latest CFO Pathways report, our analysis of research into the appointments of CFOs in 2020 and 2021 across the UK and Europe, Lizzy Caselton, Associate Partner in our Interim Management, CFO & Finance Practice discusses one of the current findings from our analysis.
Daily, I hear a consistent desire to work within a PE-backed organisation as a CFO – the magnetism and promise of a transaction, consequential financial gain, and pace of change are attractive. Yet, is it really as good as it seems?
Others favour governance, and risk adversity, and opt for a listed environment.
Below, are some of the learnings I’ve gathered from our candidates and clients who have diverse experiences in both PE and PLC environments, and the perceived pros and cons as a CFO in either.
Is there a difference in your time allowance?
There are some clear contrasts in demands on time within the opposing capital structures; namely due to the differing shareholder and Board structures impacting the speed of decision-making.
Given a typical PE investment lifecycle is circa. 4-7 years, your time as CFO within PE-backed organisations is task-driven, with a Board invested in the speed of change and delivery. Naturally, this poses challenges in itself; less regulation, and the demand for financial information more sporadically often ensures an unpredictable environment, and so less ability to allocate time in advance.
Time as CFO within a Plc requires the delivery of cyclical reports to the city – time can be allocated accordingly, and with the mandatory nature of Board meetings, allowing for structure and a greater degree of autonomy. However, these specific timetables galvanise slower decision-making processes due to the longer-term nature of Board investment (i.e. 5Y+). Time management can be more heavily scheduled, yet ever-changing City demands may result in some sporadic investor communication.
What is the risk?
The combination of strong push and pull factors will always sway you into/away from a business. In the current market and economic climate, personal financial gain poses a threat to talent retention but also the greatest magnetism for candidates, and the advantage of Private Equity investors given their cash pools.
Being a CFO within PE, you will likely gain equity within your package on appointment (0.5-3%); naturally, this is dependent on a successful business transaction, which poses a risk. Due diligence is paramount when considering a move, to negate the risk and have confidence that the promised time frame for your proposed windfall is viable. Having said that, no due diligence can truly predict the set timetable for a transaction due to the constantly changing market and available investment opportunities – the PE households have the financial control in this instance.
Being in an organisation of listed ownership is notoriously more risk-averse. The nature of the environment presents greater stability with predictable and regular bonus structures. Naturally, this can be impeded by market trading. It is worth noting, that given a lesser number of listed organisations of size and scale, there is less opportunity to move into a listed CFO role which could limit the career trajectory externally. This is highlighted in the figures in our CFO Pathway. Our research shows that prior PE experience across the UK and Europe is crucial in order to be appointed a PE CFO, with 75% of CFOs moving from another PE-backed business.
Can public exposure and protection be a benefit?
Within PE you have less autonomy, being constantly answerable to the numbers and Investors. This can be seen as a pro, and a con. The benefit is greater exposure to the PE fund and so potential for longer-term portfolio support and wider connections than you would experience in a Listed organisation.
As a CFO within a PLC, you are naturally under public scrutiny; shareholder and market engagement as well as the delivery of the financial numbers being pressurised.
Experience gained as a CFO in a PLC is seen as best-practice, particularly in corporate governance, which lends itself well as a pathway to future CFO appointments. The exposure and engagement with investors differ, presenting a greater degree of autonomy.
In conclusion, the core needs of a CFO remain the same in any ownership structure; adaptability, resilience, financial competence, and delivery are paramount – the desire of HOW you want to work as a CFO will determine which ownership model is right for you.
My opinions and research are a consequence of the consistent themes we learn from conversations with CFOs in varied ownership models. This is reinforced by data presented within our recent CFO Pathways Report which presents and analyses the findings of research in over 1,200 recent CFO appointments across the UK and Europe, in collaboration with BoardEx.
Please do reach out if you would like to discuss your personal CFO journey, and support weighing up the options.
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