The CFO Role in Private Equity:

Chief Financial Officers (CFOs) are a critical part of the private equity team.

CFOs report directly to the CEO. They also have direct access to the professionals at the Financial Sponsor Firms. They frequently work with not just the partners at the Sponsors, but also other team members on special assignments.

GREAT CFOs ARE MUCH MORE THAN SUPER - CONTROLLERS.
They:

  • Contribute to business strategy
  • Oversee M&A projects
  • Take the lead with lender relationships
  • Develop and implement operating and financing metrics
  • Implement near-term cost reduction measures
  • Create long-term investment plans
  • Plan for the ultimate sale or IPO of the business
  • Partner with the CEO to drive the overall growth of the business

The CFO helps grow the business and also keeps score on how the company (and the investors) are doing.

Typical Middle-Market Compensation for a CFO in Private Equity

CFO compensation is highly dependent on company size, company and personal performance, and relationship with CEO

Base Salary $250K to $400K $300K x 4 years $300K (100% of base salary) x 4 years = $5.4+ million over 4 years Example CFO Compensation Package $300 million of value created x 1% $1.2 million $1.2 million $3 million 30% to 125% of base salary (provided targets are met) 0.75% to 3% of value created upon exit Annual Bonus Incentive Compensation Earned Upon Exit
Chief Finance Officer - Office Chair

A VERY DEMANDING POSITION

As important as the CFO role is in private equity, it is also a very demanding position. The average tenure of a CFO can be as short as 12 to 24 months. CFOs leave for both good reasons (new personal opportunities) and bad reasons (underperformance).

In return for the long hours, great responsibilities and business risks, CFOs can earn significant compensation. Compensation is typically in the form of salary, bonus and equity incentives. Much of the total compensation is performance based – both on the results of the business and the personal success of the individual. When a business does well and there is a successful exit, compensation for the CFO can be substantial and more than what would be achievable in other roles.