The 4 Archetypes of the Private Equity CFO
Your investment thesis should dictate your choice of CFO
The seat of the chief financial officer (CFO) at a private equity portfolio company (portco) is among the hottest in business. They are responsible for helping the CEO execute the company’s vision in accordance with their private equity (PE) firm’s investment thesis, and for creating value for the fund’s limited partners.
Among their many challenges, portco CFOs must execute complex transactions. BDO’s 2024 PE Portco CFO Outlook Survey found that 21% of CFOs expect to pursue a carve-out or divestiture this year, and 33% expect to pursue a restructuring or reorganization.
Holding periods are short, patience is limited, and expectations are high. Accordingly, choosing a CFO tends to be one of the most important investment-related decisions a PE fund can make. Funds should align their choice of CFO with the lifecycle stage of their portco. To help with this process, BDO has identified the four most common archetypes of PE CFOs, using criteria based on the maturity of the company, conditions of the market, or state of the investment thesis.
The success of a private equity fund's investment in a portfolio company largely hinges on the CFO's performance. Initially chosen CFOs may be ideal for early goals, but market shifts might necessitate a change in CFO to adapt and succeed. Understanding the unique skills of different CFO archetypes is key for funds to make timely, effective leadership decisions.
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