How do your PortCo CFO's get comped / how do their lifestyles seem?
In my experience funds struggle to hire decent ones and it seems like it could be a decent career path to bounce between portco's and accelerate your career path by picking good assets that you know will transact every 3-5 years.
Any insight into how the CFO's at your portco's do and how they got into the role? Do people in their teams typically get comped well and do you think a BD or M&A type role in a PortCo pursuing a roll up strategy would be a good job / position you well for future exec roles?
Considering moving outside of the PE/IB path and this seems like something that would still have exposure to the intensity and potential financial upside while being more hands-on in operations and (hopefully?) having a better work life balance than a large fund or IB.
best is work for distressed / special sits shop where u guys buy some biz in bk for cheap, rx, then exit upon emergence. U leave to go join portco as it emerges, u get equity in the new post reorg biz (via MIP) + great cash comp (CFOs make like 700k-2mm+), and u make a nice chunk of change in doing so. U prob make just as much if not more than PE career, plus realize comp faster vs having it locked up in carry.
Thank you - helpful. Interesting to think of this play in special sits in particular
It's more fun to be CFO of a successful, growing business than a post-reorg one with a stripy capital structure (multiple stakeholders with inflated egos and diverging interests that don't understand your business) and a bloated cost base (your job is firing people and squeezing working capital). Distressed is fun and intellectually challenging for investors but it is trench warfare for operators (who have to translate the $10 mm EBITDA uplift in your model to 100 redundancy notices).
Yup, well said
Depends on your personality type IMO. I've run VC backed high growth + distressed and some in-between, and personally love turnaround. In a lot of ways, running a high-growth startup is similar to turnaround.
No access to credit, hard to recruit because you aren't established, no existing systems or data, etc.
Personally, love turnaround but I get why a lot of people do not, especially if your background involves working in very stable environments in PE/IB. Fighting creditors, restructuring teams...all really exciting to me.
With that said, I also pick the deals we do, invest my own capital and have been an entrepreneur since I was a kid...so maybe not a good person to take advice from. Have a lot more upside into each deal than a hired gun.
30M ebitda biz we sold, cfo had annual cash comp of ~400k, and transaction bonus+equity at 2.8x MoM turned out to be ~1-1.5M (I don’t remember exactly). So for the 2 years of being CFO, they made about 1M per year avg.
Thanks - on higher end of what I expected at $30m EBITDA and helpful data point.
Was it someone brought in at transaction entry or had they been with the company a while
We’ve been offering roughly that cash comp and significantly more favorable incentive equity for a similarly sized business and have really struggled to hire someone
Prior cfo stayed on through 1st sale, sponsor then let them go end of 3rd year in their hold and brought in this new cfo. This was all pre Covid as well, so had this person been brought on in 2022, I have no doubt their package would’ve been materially more attractive.
A CFO role in a PE portco is not for the faint of heart. I think it's a tough role - PE guys and gals are very numbers oriented and you have to be one your A game. Add the high levels of leverage, M&A and the CFO bears so much do the workload on an exit process. Some CFOs really like that dynamic and say it's been the most interesting role they'll have as a CFO of a PE owned company. Most I think struggle.The base plus bonus a bit less than the CEO and equity a fair bit less than the CEO.
This is the route I keep thinking that I want to go and will ultimately pursue. I've definitely noticed a dearth of talent at the finance function compared to the CEO/President function. Perhaps it is grass is greener syndrome but the idea of focusing on building a business along with limited travel appeals to me from a lifestyle perspective.
Coming from PE you can definitely speak the language of the PE fund and anticipate what they will from an information perspective. From my experience CFOs aren't flexing too much up to 80-100 hour work weeks and can usually be in the 50-60 range. That said, I think it depend on several factors: How big is the team? How well is company performing? How acquisitive is the company? All of these items will factor into it and you can definitely be on live deal sprints still, although you will control the tempo more. I think if you have a strong finance team underneath you that cranks out the numbers, and good IT to spit out KPIs, then you can feed the PE firm the data they like to see fairly easily and focus efforts on strategic initiatives
Of course I could be deluding myself. Would love to hear about others experiences.
What're the backgrounds of people who make PortCo CFO in your experience? It's something that I want to do, and I think I'd be qualified for it because I'm a CPA who has worked on transactions (via Transaction Services teams at the Big 4) and I now am working in a more data-oriented role, so I know a ton about automating reports/financial reporting processes, which is something I've noticed pretty much every PortCo struggles with whenever I've worked with them during my time in consulting. Despite all this, I haven't been getting many looks and I'm wondering if it's just because this is like IB/PE where it's very prestige-oriented and my background isn't a match that way. I'd like to think I can add more value to financial operations than some guy in banking, but either I'm doing something wrong or my background isn't really useful to these companies for whatever reason.
how exactly are you looking for these positions? maybe the reason you aren't getting looks is because you aren't actively searching.
SB'd. I generally agree, although there are certainly sprints even in a ho-hum business (audit fieldwork, refinancing, transformative add-ons). Your point about the strong finance team is well-taken; most CFO hour spikes are caused by the incredible variability as you drop below ~$30mm of EBITDA (which I think should be the target for someone transitioning from PE at a mid- or junior level).
Sometimes you have a team of assassins in accounting/FP&A and sometimes you have legacy employees who don't give a shit, will make dumb decisions if not micromanaged, and who inhibit progress. This is harder than you might think to diligence because folks are invariably going to present the best version of themselves in an interview setting. If you can get around the info asymmetry (e.g., take the CFO gig at a portco you cover), it can be lucrative and fairly chill. But that is a *huge* "if." in my experience and end of the market.
Maybe off-topic, but why? Assuming your title on here is accurate (principal in PE), I imagine you're at a point in your career where you have a healthy amount of carry pumped in the background, your workload has improved and your path to partner is clear. Why leave now?
I ask because I worry about moving up in seniority and realizing that I don't want to be there, so curious as to what's brought you to pursue something else at this stage in your career.
Because I no longer want to regularly work 80-100 hour weeks in a highly stressful, unpredictable environment
Think the scary part of it is just lack of job security. If you get bought by a strategic, not uncommon to axe the CFO. Likewise PE firms build their "go to" network and even if bought by a sponsor you may see yourself get cut after trading hands. If you live in NYC/SF where there's abundant opportunities or are comfortable with remote that all may be fine for you. But you may find yourself bouncing around a good bit. Additionally the lack of diversification is tough, if it goes poorly you're sort of out of a job and your equity. Yes you can move on but we only have so many "5 year" bullets in our career unless you want to work forever.
Certainly fair points. You need to get comfortable with a series of 2-5 year gigs and it could break either way. I think the mitigates are: (i) ensure your employment agreement has a healthy severance; (ii) and equity vests upon a sale. I've seen many CFOs get cut after a sale but it's a lot easier to deal with after a 7 figure payday. The downside case is real though: you get cut for performance (yours or the company's) and you're left without a position, reference, and zero equity - but isn't that the downside for most jobs?
Yes, but vs PE where you’re more diversified and the overall fund is unlikely to go south.
Been exploring this myself, have spoken to a few people who did it and it seems like a not so great path. Working for PE dweeb cuccs who are on your ass 24/7, are super cheap and don't want to invest in long-term growth (also don't provide you proper hiring/resourcing $$$), and your upside is capped (vs startup). It's no surprise most good talent doesn't want to work for sponsors -- life is too short to put up with their bullshit.
Maybe a better trade to make when you are the CFO or head of corp dev in an acquisitive sponsor backed company, but any level below that in the finance org is gonna be a no for me dawg.
This was basically my exact situation when I worked for a portco. It was a distressed/turnaround situation and it was just a constant battle with the investment team because the numbers were never good enough, lack of any resources (because the company wasn't making money so of course there was no budget for any help), and endless adjustments and data analysis to squeeze out every last cent of EBITDA when presenting to prospective lenders. Not fun
Got to know the CFO a lot on my last deal and he did not seem particularly happy
The CFO is typically this super experienced professional who knows the business inside and out and yet you have a 26 year old PE VP breathing down your neck all the time telling you how to do your job, tweaking budget, etc.
Agree with firing risk too - pretty frequently PE firms just plug in someone they know after a sale, not to mention the strategic buyer risk (CFO is typically first to go). Pay is good on a good outcome (typically a few million if PE hits IRR target on exit), but much less massive wealth created vs CEOs on the deals I’ve seen and often a pretty unimpressive base/bonus outside of those options.
I can certainly see it sucking but I also think a veteran CFO should be able to handle a VP. The basis of my comparison is working within PE, where you handle BS from about 5 MDs on a daily basis not to mention LPs and other stakeholders. I think part of the motivation is to get the CFO title on the resume which then provides optionality: (i) CFO at another firm (maybe not PE backed); (ii) PE operating partner; (iii) back to the investment side but at a more senior level or (iv) just straight up independent consulting.
Agree - if the CFO can’t handle the PE Vp/principals well that seems like a personal / them issue?
At the end of the day we all have bosses and dealing with fund reporting once a quarter and having pressure from them on balancing investment vs cost cutting doesn’t seem like it would be bad relative to what we’re all used to in banks/funds ?
Working in PE as part of the team - sucks
Working FOR PE with them as your boss/owner - suicide
A bunch of neorotic pale PE guys that work so hard they barely have free time/hobbies. Sounds honestly really terrible. Hard pass.
1 data point for NON-pe backed cfo:
Size: 10-20m ebitda
Hours: 45-50/week. Have done some M&A work but nothing materialized, but busier during those times. Decent amount of the d2d work outsourced to a bank though
Cash Comp: ~475k total; 300k base. Can scale up based on overdelivering yearly metrics (profit/revenue) + other mid-term incentives for achieving multi-yr growth goals. In a good year, this would be +150-250k if metrics are exceeded
edit: 1.5% phantom equity in the event of a sale but this is unlikely to happen anytime soon
sounds amazing
I went this route after a decade in banking for a few reasons:
1) I noticed that sponsors spent more time discussing management/search for executives than they did the actual acquisition target/industry. I determined there was an underserved demand for strong PE portco executives
2) Related to #1, I observed most sponsors are far less involved in their portcos than they claim, so they are again reliant on strong executives
3) You have a guaranteed monetization event in 3-6 years, with holding periods getting shorter and shorter as assets churn and stay PE-owned forever. While you probably limit your chances of a 10x return from a startup, you also don't have phantom equity that never materializes.
4) Sponsors are far more likely to see the value in ex-bankers/consultants than your vanilla F500 or small business.
5) PE-owned assets do run harder, so you have a good WLB balance without being bored with a 35 hour workweek.
Care to share your experience entering (straight from baking?) How did you decide on what industry? Was the transition difficult?
Friend is CFO of a LMM backed company, think 20-30mm ebitda - I believe cash comp is around 400-500 (maybe 50/50 salary bonus), and he got 1% of the equity - though this has probably been diluted as they've acquired companies and used stock/new equity.
edit: say that equity is worth 2-3mm, over a 5 year period, he is getting a 400-600k annual bump on the back end.
Everyone's comments here have been really informative. I'm curious as to what compensation would look like for someone directly under the CFO (e.g. head of FP&A). I have an opportunity to move to a PE portco with my former CFO and would like to gauge how I can negotiate a favorable position for myself. We have a few options in front of us:
The finance roles that I've seen that fall directly under the cfo -- eg head of FP&A, VP of Finance, etc -- for $20Mish ebitda companies tend to be paid on par with traditional Director-level roles at larger, but maybe not F100 or tech, companies. So a bit of title inflation if you're a VP or the Head of xyz but compensated more in line with a Director, which can be a fairly broad comp range. My thoughts are $165k-195k + 20-30% bonus, typically no equity. However I'd aim higher at like low $200k and see what they come back with
wow that comp is straight garbage. how are these people able to hire anyone? VP of finance at series C+ start-ups are clearing $300k+ in base comp... forget about big tech finance comp
There are too many variables that factor into experience on the operating company side. I'll list a few of the major ones. These won't be comprehensive.
1) Quality of the business. If the business performs, it solves for many severe issues. It may not resolve the severe issues (ex. Weak team; awful sponsor to work with, long hours) but it will nearly neutralize them. Business trajectory affects ability to exit, ability to attract talent, business stress/anxiety; "resume prestige", opportunity to work on attractive projects...the list is quite long and meaningful.
2) Quality of Sponsor. Track record of attractive exits? True ability and willingness to help? If they can't help, do they leave you alone? Opportunity for future reference? Opportunity to roll into the next attractive portco opportunity? Have a head of capital markets? (huge if so, much more meaningful than an associate who thinks your models "suck")
3) Opportunity to Attract and Retain talent. What geographic markets can you recruit from? Does the head of HR understand that you maybe should stretch compensation for the ex-banker type? A-team talent is almost invaluable, although few businesses (and investors) approach talent decisions with this perspective.
4) CEO and other select C-Suite talent. These are your peers and likely who you report to (CEO). What's their track record? Does their experience align with what you think the company needs? Is the CEO looking for a peer or a sycophant? Do you want to be a peer or a sycophant? Were you hired by the CEO or the Sponsor, or both?
Compensation is wide-ranging. Cash compensation does seem to band from $300k-$800k, with most falling between $400k-$500k. Our company is at the high-end of the range. Regarding equity compensation, I'll reiterate point #1 (business quality). Our business has performed ahead of all stakeholder expectations, most importantly the sponsor investor. Think like 2.5 years ahead of their investment case and with a mid-cap to large-cap business size transition. Equity compensation is in the tens of millions for 10-15 employees (including CFO). Another 10-20 employees are in the mid-single-digit millions. I understand that this is a very favorable situation. I also understand that these opportunities do exist (though not often). Two deals I worked on during my time in banking had similar equity compensation results for the executive team. Many did not.
Lastly, we work exceptional hard and are lean. 60 hours/week is slow. 70 is normal. 80+ during a few times each quarter. 90+ twice/year. We hold ourselves accountable to the standard of the rockstar MD you worked with, who has no relationship with his/her family because they truly want to spend their free time working for their clients. Very high standard across the company. You get what you earn.
Really helpful. Just to ask - if it's 70 hrs a week as normal, why choose that vs. stay in PE?
Few of them here.
I personally feel more fulfilled and energized helping build a business with 20 other people (out of a much larger employee base) who I would do anything for.
I have found it easier to build and sustain a competitive advantage on the operating side of private equity vs. the investing side.
The financial upside at this particular opportunity is much higher. Say you're on the list of the 10-15 employees with $10mm+ of proceeds; takes many years to realize the same amount through carried interest.
Stumbled upon this old thread, and saw a few other asking about PE/PortCo CFOs. I don't understand (and I think it's laughable) why anybody would want to work at a PE-owned company...literally your comp is capped and you're only going to make slightly over $1M/year working with d-bags looking to squeeze every penny from the company and sell it to some other greater fool.
It's much more preferable to work for a high growth tech startup as a CFO (or even VP) - you'll make significantly over $1M TC at a mid-size company. Some of my past bosses (the CFO) have made >$100M in previous roles (vesting over 4 years, so >$25M/year).
Keep in mind that a Tech VP = Banking MD, and Tech Director = Banking VP.
How do I know? I am 34 and work as a Finance VP with TC >$1M. Previously ex banking & buy-side.
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