Private equity firms want special skills in their portfolio company CFOs

Sponsored by

Being asked to do more with less? You got this. With Bill Pay from QuickBooks, you can manage more invoices without more staff. See how it helps you process hundreds of bills, pay them in minutes, and automatically reconcile books (in one place).

With about 21,000 private equity-backed companies in the US, according to an EY estimate last year, there are plenty of CFO jobs to fill at PE-backed companies. US PE activity last year amounted to more than 9,000 transactions and an aggregated value of more than $1.2 trillion, according to Cherry Bekaert; there are more businesses (including accounting firms) joining the ranks of portfolio companies (portcos).

Do you have the moxie, experience, or both to lead finance when you have to answer to a financial sponsor?

Before you say yes, the first thing to note is that the qualifications differ from those of a startup or corporation. For example, “large corporate CFOs are accustomed to abundant resources, established processes, and long decision cycles,” Antonia Halliday, a partner at executive recruiter Calibre One, wrote recently. “They thrive in predictability, in depth and structure.”

In contrast, a PE-backed business “is characterized by ambiguity, compressed timelines, and a constant focus on value creation. The finance function may be lean, the data messy, and the expectations high.”

Matt O’Brien, a partner at financial recruiter Resource Management Group, told Hunt Scanlon Media recently that “the CFO search market right now is the most competitive I’ve seen in my 25 years in executive search, especially in the private equity world. The CFOs who really drive value in PE-backed businesses aren’t typically looking for their next role—they’re busy building companies and they’re very selective about the conversations they take.”

To find out what PE search committees and financial sponsors want in a CFO candidate, we asked Mark Jansen, an Atlanta-based independent recruiter with Frederick Fox.

He gave us four nonnegotiables he sees from search committees.

Operational copilot. PE firms “no longer want a CFO who just stays in the back office,” Jansen told CFO Brew. “They want a partner for the CEO, someone who can operationalize the investment thesis.” He’s seen PE firms reject candidates with purely finance backgrounds. “They want someone who’s maybe…managed a transformation office,” Jansen said.

Advanced AI experience. Responding to a financial sponsor’s question about AI with, “‘Yeah, I’ve been looking into that,’ that’s probably not going to work,” Jansen said. “They want someone who [can] explain how they’ve used AI to express G&A cost, or someone who can build a tech-enabled finance function that can scale without adding headcount…That’s huge, because it’s all about EBITDA and, you know, growing profitability.”

Prepared for a transaction. With sponsors’ focus on exit transactions, they want a CFO who can get the books in order and get a company ready for sale—“someone who could bring a playbook and standardize a way of setting up data rooms and KPIs,” Jansen said. “If the right buyer comes along, the company could be ready for sale within…72 hours versus two months.”

Backbone. Sponsors need a CFO “who could stand up to them in a board meeting” and “be a truth-teller to the CEO, for example. I think lots of times PE firms like to pair a visionary slash founder CEO with more of a disciplined CFO,” Jansen said. A CFO who has “a strong EQ to not create unnecessary conflict within the company, but at the same time, not be a ‘yes man’ to the CEO.”

What can you do to get into private equity? How can you sell yourself?

“You really have to focus on…how did they help grow the company?”Jansen said. “Not just [their] ability to close the books in five days, but…how you designed the accounting and finance department to increase the value of the company.”