In the public eye

Ahead of its planned listing on the New York Stock Exchange, Apollo Global Management revealed in an SEC filing that it’s CFO, Kenneth Vecchione, would be leaving the firm, and Apollo was in the process of looking for a replacement. While Apollo didn’t say what the reasons for Vecchione’s departure were, a CFO departure is not an uncommon event before a private firm goes public. 

Once a firm is publicly listed, the job of the CFO changes significantly. A CFO who thrived at the private company may not be qualified for or interested in the same job at the public company. 

“A large number of companies that go public look for a new CFO before they list, or they bring in a more experienced person for an interim period of time while the CFO learns how to be a public company CFO,” said Gregg Passin, a partner at human resources consultant Mercer.

Perhaps most importantly, once a firm goes public, the CFO has to spend a lot more time in the public eye. Whereas before, the CFO interacted with a carefully selected group of sophisticated limited partners, now the CFO has to report to a much larger universe of public investors which is constantly shifting – and which the private equity firm can no longer carefully select. 

“You have to be able to deal with the public markets which is a completely different mindset,” said Tim Smith, CFO of Euronext-listed private equity fund of funds Conversus Capital. “It means dealing with public investors, sell side analysts, public side bankers and several different regulatory bodies – many of the relationships you don’t have to manage as a private company CFO.”

Public company CFOs also spend much more time talking with research analysts and with media, and fielding questions on quarterly, semi-annual and annual earnings calls.

“[As a public company] your CFO needs to have a public presence,” Passin said. “On an earnings call it's the CFO who goes over the numbers. You have a much more public persona both within the company and in the public.”

Not all CFOs enjoy having a public presence, of course, and an aversion to the spotlight might be what drew a CFO to a private equity firm in the first place. CFOs who prefer to stay behind the scenes and crunch numbers might not want to stay on board when the firm goes public.

Not only do public company CFOs need to spend much more time talking to stakeholders, but they need to be much more careful about what they say. 

“If you’re sitting down with an investor, you have to be careful not to divulge information that is not already publicly available to all investors. Everyone has to have a level playing field for obvious reasons,” Smith said. “It’s just a different level of accountability when every word you utter in a public domain is scrutinised closely and could trigger a shift in how an investor or analyst views your company as an investment.”

The CFO also needs to be very deliberate about what he says in the press, because the company is held to any public statements he makes. If the CFO makes a statement about strategy or about projected earnings, the firm has got to follow through. A CFO at a private firm, on the other hand, could theoretically change his mind every month, Smith said.

Finally, the reporting burden increases significantly when a firm goes public. A private firm can largely disclose whatever it chooses to its investors, but a public firm is subject to detailed requirements. Putting together reports becomes a more cumbersome – and more frequent – process, so the CFO and the finance team needs to be ready for the added work. And timeliness becomes much more important once a firm is public. A private firm is subject to whatever timeline it agreed to in the limited partnership agreement, but the LPs usually won’t dissolve the fund if the GP needs another week to pull together the annual report. If a public firm misses a reporting deadline, however, there are very real consequences from the regulatory authorities. 

“You need the ability to handle pressure,” Passin said. “Every quarter, those few days before earnings go out, you could cut the pressure with a knife at most companies.”