CFOs lured by high pay in private equity sector

This is an extract from an article, brought to you by Agenda, an FT Specialist publication that focuses on corporate boards. 

Stephen Tarrant, Partner within our CFO & Finance Practice contributes his thoughts on the topic and discussed why there is an increasing number of chief financial officers who stayed loyal to their companies during the pandemic are leaving their jobs. In particular, some are lured away by lucrative offers from private equity-backed businesses.

Over the past 12 months 20 per cent of FTSE 100 CFOs left their jobs, compared with 13 per cent in 2019 and turnover was subdued during the pandemic which led CFOs to stay in post.

In the US, CFO churn rates in S&P 500 companies rose from 14 per cent in 2019 to 15 per cent in 2020 and 18 per cent in 2021.

For some CFOs, stock market rises in 2020 and 2021 made an early retirement more attractive, says Josh Crist, co-managing partner of CristKolder Associates.

In the UK, demand for CFOs from private equity companies is increasing, says Stephen Tarrant, a partner at Eton Bridge Partners.

Private equity deals often result in a change in CFO, says Tarrant. Globally, these hit a record $1.1trn in 2021, almost double 2020’s total of $577mn and higher than the previous record of $804bn set in 2006, according to Bain and Company.

The equity available in PE can be more attractive than that on offer with a PLC of a similar size, although that is often dependent on a successful exit, which is not guaranteed, says Tarrant. What is regarded as successful can vary but it is usually related to a profitable sale or a money-making initial public offering.

Last year, 66 per cent of CFO appointments occurred in private equity-backed companies compared with 26 percent in public companies, according to the annual CFO Pathways report 2022, published by Eton Bridge Partners in September 2022.

The challenges faced by boards and executive teams are changing business models and performance, says Cunningham, pointing to Covid-19, geopolitical tensions, climate change and different consumer behaviour.

“From a CFO perspective, not only is it their role to ensure that they’ve got the adequate financial resources in place to navigate those types of issues, but they are clearly there to help the business achieve its strategy and drive sustainable shareholder value creation.”

Stephen Tarrant

Partner
Executive Search
CFO & Finance


Stephen is responsible for senior finance appointments across the UK and Europe. His client base is a mixture of Blue Chip and high growth PE backed businesses.