OVERVIEW: In October 2016 Vardis contacted the CFOs of 620 North American and European private equity portfolio companies with questions on compensation and job content. Those surveyed are representative of the broader Private Equity market. Sponsors ranged from lower middle market investors without committed capital funds to the largest global sponsors with over $75B under management. Portfolio companies represented a range of industries with the largest concentrations in manufacturing, consumer products & services, technology, healthcare, financial services, distribution and industrial service.
We are pleased to share the results of a survey of CFOs of private equity owned and public companies. The survey focused on: Compensation, Job Content, and the Differences between PE and Public Ownership.
/ MARKET EFFICIENCY
- PE Investors retain existing CFO post deal only 25% of the time
- Average CFO tenure of 3.67 years consistent with shortened hold times
- CFO’s are not trading cash for equity – majority receive an increase in new role of 5% to 20% with 40% reporting an increase of 20% or more
- Virtual parity with public company peers on annual cash compensation
- Slight discount on base salary offset by higher bonus, i.e. “pay for performance”
- 55% co-invest in the equity with 1/3 investing > 1 year of annual salary
- Average vesting 4.3 years
- 70% have accelerated equity vesting at liquidity
- Performance vesting is replacing time-based vesting. 50% have performance criteria attached to equity payout.
/ CFO’S ROLE
- Only 26% of CFO’s report their current role as their first corporate CFO role
- 46% have previously held a PE CFO role
- The primary reason for their selection for the role is prior PE experience (55%) followed by industry expertise (39%)
- 73% of CFO’s are responsible for functions beyond finance including Legal (73%), IT (69%), HR (51%), Purchasing (36%)
- Only 20% of first time PE CFO’s report “business as usual”. Key differences compared to their prior roles include: