CFO hunter

How has the role of the private equity firm CFO changed over the past few years?
Traditionally there has been a spectrum for the private equity finance function ? at one end is 100 percent outsourcing of financial reporting and processing of partnership statements with no CFO. At the other end is having an in-house CFO who, up until a few years ago, was an incredibly strong controller with the strength of personality to deal with principals of private equity firms.

What you have seen over the past three or four years is the build out of infrastructure across the board for private equity firms, whether it is IR professionals, chief financial officers, heads of risk, heads of compliance, corporate communications. This reflects the growth in the partnerships and the growth in the capital. Specific to CFOs, there is an increasing complexity of global and multi-sector funds, and firms that have multiple asset classes. There is a demand for incredibly sophisticated finance professionals to deal with these massive firms. Finance, communications and risk professionals have become a hot commodity for the private equity firms.

Given the complexity of the job, where are you going now to look for CFOs for your private equity clients?
You first look to sophisticated financial services institutions ? investment banks, asset management firms. And then, there is no question that you have to look at corporate America, particularly multinational, multi-product corporations. These corporations can provide the sophistication needed to succeed in the private equity roles.

Have general partners come to terms with the fact that they will have to pay more to get a more sophisticated, experienced kind of CFO?
I do not think it has occurred to them, but they will not have much choice really. They demand the sophistication and knowledge, and so they will understand and agree that they need the most sophisticated finance professional they can find.

The CFOs of today and the future will have a seat at the table with the partners at the firm. They will be on the operating and managing committees with these firms. Even if firms do not go public, some set of their assets will be registered on exchanges. So I think the CFOs being recruited now will provide the backbone for getting the structure correct to maximize performance and maximize the value of the firm.

But they also need to understand working within a partnership, not within a hierarchical corporate structure. Chemistry is as equally important as technical skill and intellectual horsepower.

In speaking with potential CFO recruits, do they find private equity attractive?
Yes, but you see some head-scratching. Some of them are trying to figure out what the role is, how much of it is partnership reporting and processing, and how much is transaction-based. Being assigned to the non-deal-making part of the firm, they are trying to evaluate the value they can bring, and how they are valued by the senior partners at the firm. It is an educational process for a corporate CFO to understand the role and value of the private equity CFO.

How does demand for CFOs compare with demand for IR professionals?
You have to look where we are in the cycle of firms right now. While there's a lot of fundraising going on, we are probably coming off the biggest two or three years of fundraising. So clearly the investor relations professional has been crucial to the success of the firm. The more communications ? driven IR person is going to be crucial going forward, keeping up good communications with investors. One of the issues that arose from the turbulent 1998-to-2002 period was LPs frustrated with not enough communication from firms. With so much more capital to deploy, the role of the CFO is now becoming highlighted, whereas fundraising was everyone's focus over the last couple of years. The CFO is going to wave to find the 25th hour in a 24 hour day!