- CFOs and the private equity executives who invest in their companies don’t always see eye to eye on the responsibilities each brings to the relationship, a survey by financial services consultant Accordian and Wakefield Research finds.
- The survey of 100 private equity (PE) executives and 100 CFOs show they're in close agreement on where companies should deploy resources in the coming year: cost reduction and technology enablement. About half of PE executives and CFOs agree these should be their next-year goals.
- But when it comes to how CFOs see the role of PE executives and vice versa, the two bring very different perspectives. 92% of the executives say they’re meeting expectations of the company they’ve invested in while only 29% of CFOs feel that way.
“It’s an ocean of misalignment that points to the need for clearer communication about roles, clearer consensus about operational guidance, and more informed collaboration to ensure a valued and productive partnership between PE firms and management teams,” the report says.
There’s similar disagreement over whether the PE firms are making reasonable demands on the CFO. In the survey, 92% of executives say they are but 74% of CFOs say they aren’t.
“It’s a conflict born, in part, from lack of communication,” the report says. “PE firms make many reporting demands, but don’t necessarily explain the context for those requests.”
The report goes on to say PE executives should be clearer about their need for the reports they request; CFOs should be proactive in asking why they're requested.
One solution both sides agree on: adopting technology that would enable more informational sharing without CFOs having to disrupt their work. More than 80% of CFOs and more than 90% of executives say some type of digital assistance could reduce the burden.
At the root of many of these conflicts, the report suggests, is a mismatch between the model that underlies the PE firm’s investment in the company and the type under which the CFO prefers to operate. In general, there are two types of investment models: operational and investment. If a PE investor takes an operational approach, the investor comes in as much as an operational advisor as a funding provider; in an investment approach, the investor is mainly a hands-off finance provider.
In the survey, almost a third of CFOs (29%) say they’re not working with their preferred investment model.