Private Equity CFO

Private Equity CFO | Chief Financial Officers

Over the last few years private equity firms have succeeding in attracting many chief financial officers from jobs at large public companies. These CFOs opt out of cushy, high-ranking positions to work for private equity firms and their portfolio companies.

Private equity firms are willing to compensate chief financial officers very competitively because there is a high demand for executives with experience managing a company's finances with a wide range of responsibilities including financial planning, record keeping and protecting against risk. Chief financial officers also make the move for the possibility of sharing in the immense profits from a successful private equity deal when the portfolio investment is sold to another buyer or taken public. One negative aspect for entering the private equity industry is that many private equity CFOs must move from company to company as their services are required. Chief financial officers often give up a safe and consistent job with great pay for the career in private equity but find that not all private equity firms are successful. CFOs are then faced with the decision between taking a potentially higher paying, exciting position in private equity with a risk of losing money in the new job or remaining in a stable, well-paying job with one company.

The idea of moving to a private company may be attractive to an experienced CFO because private equity-backed companies are often in a transitional period that allows for the chief financial officer to use his talents to improve the company. The challenge of taking an underperforming company and having a vital role in its success can be appealing to CFOs unsatisfied in their current work.

More Valuable as a Private Equity CFO

Despite the tech burst, which showcased the risk to those working at private equity-backed firms, many CFOs welcome the risk because the huge monetary incentive if they are able to produce positive results and make the company attractive to the public or another buyer. Additionally, chief financial officers may feel undervalued or unappreciated at a standard post within a firm. In many large public companies, the CEO often dominates the lower-level executives like the CFO but many cheif financial officers working in smaller private equity-backed companies are regarded as vital to the success of the company and treated with more attention. In private equity, CFOs are a "hot commodity" and the private equity model allows them to showcase their talents in an important way. Although CFOs are in high demand, when making the decision to transition to private equity they may have to prepare for a period of unemployment.

CFOs working in private equity have taken on a different role than they did a few years ago, according to Chad Brownstein a managing partner at ITU Ventures in Los Angeles, he says "Before, venture capital firms hired smart numbers guys from accounting firms (as CFOs) that the CEO could manage." Now it seems that private equity firms are willing to pay a CFO higher and offer a more prominent within the company. Rather than focusing mainly on accounting, today's private equity CFO also takes on a major interest in the company's capital structure and finances. Mr. Brownstein illustrates the point, “Every CFO we have is part of our network. We are working equally as hard to get the right CFO as the (right) CEO. It’s a critical role.”

As chief financial officers anticipate a greater role and higher compensation in private companies the transition from large public companies to smaller private equity firms may become more and more attractive, even with the inherent risks.

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