“But have they ever worked in PE before?” is the most common question when screening CFO candidates. PE is one of the most challenging environments in which a CFO can operate, and proven comfort with high leverage, frequent reporting, and working capital pressures is seen as crucial.
Contrary to conventional wisdom, most portfolio company CFOs have never held a PE-backed CFO role before, and this is especially true for portfolio companies of funds in the €1-4.99bn range.
Similarly, the CFOs of smaller portfolio companies are 14 percentage points less likely to have led a business through an exit than those at the helm of large-cap portfolio companies.
The PE market was extremely buoyant between 2018 and 2020 but funds have recently fallen back on old habits, increasingly hiring based on experience rather than potential.