CFOs at private equity backed firms have a tenure 17 percent shorter than their listed peers. PE backed company CFOs face higher pressure but bigger rewards, FDs at unlisted companies without PE shareholders have longest tenure of all.
Finance Directors and Chief Financial Officers at private equity backed companies in the UK have a significantly shorter tenure than their counterparts at listed companies, reveals research by Edward Drummond, the leading executive search firm. According to Edward Drummond, finance directors at the 100 largest private equity backed companies* had an average tenure of 3 years and 11 months, 17 percent less than the average of 4 years and 9 months for finance directors at FTSE 100 listed companies. Finance directors at the Top 100 private companies, without private equity funding*, have the longest tenure of all at an average of four years and ten months. Edward Drummond explains that the significantly shorter tenure for finance directors at private equity backed companies is a reflection of the highly pressured and challenging environment that finance executives face at PE-backed companies.
Neill Fry, Director at Edward Drummond, comments: “Whilst the pressure on directors of private equity companies to deliver can be even more intense than at FTSE100 companies the rewards can also be much greater. A finance director that takes a company from buyout to IPO will normally see the value of their shares hit the level at which they can very comfortably retire.” Edward Drummond says that many finance executives find they thrive in the target focused private equity environment where the quality of financial and other management information is so highly prized. Explains Neill Fry: “Many finance directors who have worked successfully in a PE backed company find it so appealing that they spend the rest of their careers only working for PE backed companies.”
“Private equity investors want an outstanding finance director who is adaptable, able to make tough decisions and able to keep up to speed with the agenda agreed with the PE firm. The approach of an IPO can create additional pressures and requires a very specific skill set from the finance director. Sometimes preparation for an IPO will mean a change of CFO if it is felt that is what is needed to gain acceptance from institution investors.” Edward Drummond says that the longer average tenure of finance directors at privately owned companies without private equity ownership, supports the idea that without external shareholders to account to, CFOs in these private companies may feel under less pressure. However, they say that private companies will also provide lower total pay to finance executives than at private equity and listed companies.
