What happens to corporate finance team of a portco post acquisition
Randomly thought about this based on a deal that I’m on. If a middle market PE shop builds a portco to the point it can be sold to a larger PE acquirer, what happens to the corporate finance department in that business after being sold?
i imagine that some acquirers would just cut the fat and introduce their own corpfin partners.
However, lets say the portco’s finance department is mainly just the CFO and maybe one or two people that works under them. How common is it for the PE buyer to wipe this team clean and just do the corpfin portco work themselves?
Ah, the life cycle of a portco's corporate finance team post-acquisition, quite an interesting topic!
When a middle market PE shop builds a portco to the point it can be sold to a larger PE acquirer, the fate of the corporate finance department can vary greatly. It really depends on the strategy and structure of the acquiring PE firm.
Some acquirers might indeed "cut the fat" and bring in their own corporate finance partners. This could be due to a variety of reasons such as wanting to have their own trusted team in place, or believing they can operate more efficiently.
However, if the portco's finance department is lean, consisting mainly of the CFO and a few others, the PE buyer might decide to keep this team intact. This could be due to the team's intimate knowledge of the company's finances, or the PE firm's belief in the team's capabilities.
In my experience, it's not very common for the PE buyer to completely wipe the team clean and take on the corporate finance work themselves. This is because PE firms typically prefer to focus on strategic decisions and rely on the portco's team for day-to-day operations.
But remember, every deal is unique and there's no one-size-fits-all answer. It's always a case-by-case basis.
Sources: Q&A: Private Equity Portfolio Company CFO, Corporate Finance Q&A with accountingbyday, BJM85, STorIB, and djfiii
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