PE HUB Wire Highlights, 8.1.19


Photo of Luisa Beltran, PE HUB Senior Editor, courtesy of Buyouts Insider.

GP-led deals take stunning chunk of secondary market; Lightyear to make more than 3x on Wealth Enhancement; The disconnect between CFOs and PE firms

Welcome to August, Hubsters.

There’s a report out today that highlights the disconnect between PE firms, their portfolio companies and the CFOs. More than two-thirds of CFOs surveyed, or 71 percent, say their PE sponsors has not lived up to expectations, according to a report from Accordion.

While PE firms tout the guidance they provide to their companies, CFOs value the money they’re getting from sponsors rather than their tutelage, The State of PE Sponsor-CFO Relationship said. Many CFOs are also not matched correctly with their PE firms. Some CFOs prefer to work with a firm that has an operator model but are employed by one that has an investor model, the report said.

Now, Hubsters, I’ve asked you before about how valuable CFOs are in the portfolio company. Many times, they take the fall for decisions, I’m told. These execs realize their days are numbered, according to the Accordion report. Most CFOs, or 66 percent, are concerned about job security and believe it’s a default issue that leads to their demise. The CFO is always the first to go.

The Accordion survey questioned 100 PE sponsors (senior executives) and 100 CFOs at private equity-backed companies with $50 million or more in annual revenue.

Hubsters, what can PE firms do to live up to CFO expectations? Do you believe these executives are not supported? Send your thoughts to lbeltran@buyoutsinsider.com

Carlyle‘s decision to switch to a C-corp and eliminate its dual class structure could cause issues for other PE firms, according to Wylie Fernyhough, a PE analyst at PitchBook. The change means Carlyle could be included in the S&P and Russell Indices, which may cause its share price to rise. “Significant outperformance may create internal tension for the other public PE firms; a fiduciary duty to shareholders could pressure executives to eliminate dual-class share structures which conflicts with founders desiring to keep a solid grip on the firms they built,” Fernyhough said.

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