Changing Front Office

When a blockbuster deal breaks, it’s usually the firm’s senior dealmakers that get all the attention. But a critical part of that success is the work of the group’s chief financial officer – a role that in recent years has seen its stock grow substantially.

It’s no secret why. The demands on private equity CFOs have increased hugely as the industry has become more institutionalized, with investor requests getting ever more complex and regulatory requirements getting ever more stringent (meaning more sensitive work for the firm’s compliance and finance function). It’s a difficult job that doesn’t always get the recognition it deserves.

But our brand new research into the private equity CFO role reveals a growing awareness that private equity CFOs are just as important to a firm’s performance as the higher-profile dealmakers. Better understanding how these professionals operate should therefore be helpful for any GP looking to assess its competitiveness and sustainability.

Between August and October 2013, professional services firm EY and our parent company PEI asked well over a hundred finance executives worldwide about their job responsibilities. The findings offer a clear insight into a role for which the term “back-office” seems increasingly inappropriate.

Alongside questions about CFO's attitudes towards regulation and compliance, valuation, financial reporting and operational efficiency, the survey also asked respondents to rank the factors used to review their job performance.

Overwhelmingly, CFOs said they do their most important work when interacting with their deal-focused colleagues. Second to that, CFOs view themselves as most valuable when managing investor requests, which together with dealmaker collaboration, supports the notion that CFOs are now an integral part of the “front office” functions generally perceived to be the domain of investment teams and IR staff. Other key factors cited by CFOs included managing internal costs, completing audits with minimal issues and, to a lesser extent, an ability to retain personnel.

Those of you attending the PEI CFOs and COOs Forum in New York this week will get to hear the findings in full, as well as an on-stage discussion that puts some of the numbers in greater context.

We of course invite readers of PE Manager to attend the event by CLICKING HERE. Like our own publication, it’s the one conference dedicated to the private fund professionals responsible for overseeing the firm’s finance and operation functions. Indeed, it’s an event born out of the very same philosophy that we here at PEM espouse: that the elevated status of the CFO is a necessary, inevitable and deserved by-product of their increasing importance to a firm’s success.

Hope to see you there.