Replacement of CFOs in Private Equity and PLC have followed very different trends during this crisis.
Since the start of March, the Private Equity and PLC Markets have responded noticeably differently to one another. PLC executive change within the finance function was modest prior to the lockdown with a significant increase on or around lockdown, with a peak around financial year end and a decline only occurring around Easter. By contrast, the volume of activity within Private Equity backed organisations has increased substantially prior to lockdown and only declined the week before lockdown, which has since persisted.
Within the FTSE 350, there has been a modest number of CFO changes in April with 3 changes a week before lockdown, contrasting with 13 CFO changes a week post the start of lockdown, with the natural slowdown in appointments towards Easter and the bank holiday.
However, for Private Equity backed organisations, there appears to be a much more significant drop in CFO changes post the start of lockdown in the UK, with 44 CFO changes a week before lockdown and 13 changes post the start of lockdown.
Given the differing shareholder and board structures and therefore speed of decision-making in the two capital structures, does this imply that it is much quicker to deploy a change of CFO in Private Equity vs PLC? This would make sense, as the views and opinions of shareholders and external relationships do not necessarily need to be taken into account prior to a board change. There is also no formal announcement in Private Equity and such decisions are not price sensitive.
Through our own experience we know that PE firms are very supportive of their portfolio businesses, often deploying their own resources in the form of performance impairment teams and liquidity experts to support portfolio management. This gives huge support to the portfolio CFO who is feeling the pressure; obviously this resource isn’t available in PLC.
Whilst a bit of a generalisation, through our own experience we have noticed that Private Equity houses are very open to using technology to support an offer process (Recruitment by Video Conference). Whereas for CFOs in PLCs we have noticed a much more risk averse strategy, with a number of offers being pushed out until post-lockdown and a need for face-to-face meetings. This has led to a substantial increase in the number of interim CFO mandates that we are handling.
Drax Leads:
Mark Tomley
Director, CFO Practice
mt@draxexecutive.com
Jack Hird
Associate Director,
Agile Transformation – Finance & Interim CFO
jh@draxexecutive.com
