My private equity friends are usually good for a memorable quite once in a while but they usually have to do with frustratingly high purchase price multiples when buying assets or fair but inflated multiples when selling. This time, it had to do with Chief Financial Officers and how hard it is to find top decile ones when needed. Our PE clients say they replace the CFO almost three times as often as the CEO during their ownership period and would like to re-hire their best, former CFOs once they sell their assets to new owners – but timing is not always perfect and other PE firms can come in and hire them away when they have an immediate need.
At Lancor, we have had several clients ask us to marry our long history in Operating Partner searches (~50 in the past decade) with our CFO practice. Clients realized that when PE firms sell their portfolio companies, the good CFOs in these assets will not be on the beach for long. The problem for PE firms is they may not have an immediate asset for the talented CFO once he leaves another PE firm's portfolio company but anticipate they will over the next three to five months once they close on their own next investment. To fix this, we help them hire these top 5%ers and then have this CFO spend time with a few of their other portfolio companies (like a finance Operating Partner – and paid at a full CFO rate) until they close on their next portfolio company.
This new CFO / Operating Partner allows other existing portfolio companies to have an extra, high quality finance professional push along the “to dos” in the finance team, while bringing in processes and concepts from their prior firm and portfolio company. It also allows the CFO to keep busy, have a full-time job and know they have their next CFO job lined up.
This CFO / Operating Partner title has begun to help solve the age-old issue of timing for CFOs and PE firms so that CFO does not need to stand for Can’t Find One.
Scott is a Partner at Lancor and has over 20 years of deal generation, M&A, financial services and executive recruiting experience. He leads Lancor's New York City office. Through Lancor's Advisory practice, Scott and his team assist private equity funds with originating and appraising potential transactions, sourcing industry experts for pre-acquisition due diligence, and finding backable senior management teams. Scott has worked within the banking and private equity ecosystem as a banker and by serving C-suite and board level multinational clients within the private equity and family office sectors.