4 minute read 19 Apr 2021
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Five focus areas for private equity-backed CFOs

By Fredrik Bürger

EY EMEIA Private Equity Value Creation Leader

Trusted advisor for private equity firms. Advocate for helping vulnerable people stay happy, healthy and independent.

4 minute read 19 Apr 2021

Key areas that leading private equity-backed CFOs must master to succeed.

In brief:

  • CFOs of private equity-backed companies have been under intensified scrutiny since the start of the pandemic.
  • Focusing on five key areas will enable PE-backed CFOs to successfully respond to the evolving investor demands.

The survival rate of Chief Financial Officers(CFOs) in private equity (PE) is notoriously low. Most are replaced within 18 months of investment and those able to make it past that point, still have an average tenure of 20% less than their listed counterparts. However, those that demonstrate an ability to survive and thrive in a PE context, will be called on, time again.

The CFO role comes under intense scrutiny within PE-backed companies (not least because they are typically leveraged and therefore cash-driven environments). In the past year, the combination of pandemic-led transformations around technology, talent and the changing finance operating model has seen investors demand even more from their CFOs.

In consultation with PE houses and their management teams, we have identified five key areas that star PE-backed CFOs must master.

1. Establishing a “cash culture”

Cash is always vital in PE, but the pandemic-related lockdowns intensified this. PE funds were laser focused on ensuring companies had sufficient cash to survive. This typically placed intense pressure on CFOs to forecast liquidity requirements, identify opportunities and accelerate cash flow from across the business. At the start of the pandemic, many PE firms asked their companies to fully draw-down any revolving credit facilities they had available, to ensure they could survive prolonged economic hiatus.

The speed with which PE-backed companies are able to react and respond to crises is a key advantage. Whereas listed companies tend to have relatively slow, hierarchical structures, the clear line of sight between company managers and PE owners allows (or even obliges) senior executives to move fast.

Under our operational improvement programme, PE CFOs were able to unlock on average 5-7% of revenue cash flow improvement within 12 months. For some industries, the improvement factor was seen to be 10% of revenue or more, setting a strong benchmark for other management teams across their portfolio.

2. Frequent targeted reporting

The type of CFO who will thrive in today’s PE environment will be able to demonstrate a tight grip on metrics and KPIs, and communicate them frequently. Indeed, in a PE context, it is difficult to over-communicate, with weekly calls from PE executives to the CFO not uncommon, even in normal times. When a crisis hits, this frequency can ramp up significantly. This makes for a more informal, pragmatic approach to reporting than the quarterly schedules of listed company finance functions. 

There is an ever-increasing demand for insights that can be extracted from data that provide maximum visibility of business performance, particularly in the run-up to an exit process. The ability to identify those data initiatives that deliver high-value and quick wins, while also demonstrating progress with medium- and longer-term initiatives, will set apart star CFOs from the pack.


Private equity-backed CFOs have to master new areas to survive and thrive in the PE world.


3. Playing a pivotal role in acquisitions

PE CFOs can play a more meaningful role to drive success in an acquisition. Our 2020 EY Global Capital Confidence Barometer found that 50% of global executives claimed their most recent acquisition achieved lower synergies than initially intended. But unlike their corporate counterparts, whose insights can be constrained to financial diligence and funding structures, PE CFOs can gain a more data-driven, analytical and holistic view of the organisation. They are able to fully own and oversee the value creation analysis of a deal which, in other operating environments, is typically delegated to other corporate development or commercial functions.

Given their detailed understanding of cost structures, a PE CFO can push the deal team to aim higher by planning larger transformational and value-focused initiatives in the target or combined organisation. At the same time, leveraging their acute financial and data insights, they can better assess goals and synergies that could be effectively measured, managed and achieved. PE CFOs can be positioned to prepare synergy projections and develop the deal model to pressure-test and calibrate them.

4. Operating in a growing arena of value creation

The role of the CFO, across all operating environments, has become increasingly strategic, whether it is helping to build trust in the business, develop talent or adopt technology for a more agile finance operating model. In PE, this is the case, and more. Value creation priorities extend to asset growth, business expansion, business integration, exit preparedness and capital raising strategies. The field is set for only the most robust all-star player able to withstand the multi-faceted scrutiny and exposure.

In our annual EY Global PE Survey, the past eight years have seen the CFO assume greater responsibility for improving their firms’ overall operations. This year’s survey saw their scope extend even further to areas such as sustainable investing and diversity and inclusiveness. The ability of a PE CFO to stake a leadership role to help their firm navigate a rapidly changing landscape has never been more important.

5. Demonstrating adaptability amid uncertainty

Despite various challenges faced over the years, none has tested PE CFOs quite as profoundly as the COVID-19 crisis. They have had to quantify the impact of the pandemic on their business, revise how sustainable their current business trajectory is and articulate their COVID-19 story to demonstrate resilience for future investors. 

This experience has left an indelible impression on business and PE leaders alike. According to our EY Global PE Survey, in the next three years, nearly nine out of ten PE firms expect their operating models to be transformed as a result of insights gained during COVID-19. Meanwhile, most PE CFOs largely agree, with only a minority expecting operations to return to the situation pre-COVID-19.

Those CFOs that have demonstrated an ability to adapt and respond strategically amid great uncertainty will find they are never short of new opportunities from the PE world. 


As private equity-backed companies continue to transform beyond the pandemic, CFOs who excel in five key areas will make themselves indispensable.

About this article

By Fredrik Bürger

EY EMEIA Private Equity Value Creation Leader

Trusted advisor for private equity firms. Advocate for helping vulnerable people stay happy, healthy and independent.