- According to Deloitte, sponsor-backed CFO turnover is as high as 80%. A CFO’s ability to select the right opportunity (or wisely avoid the wrong one) is thus essential.
- Sponsors and CEOs cannot be counted on to provide the full picture during the interview process.
- Discerning CFO candidates conduct multi-dimensional diligence to ensure the right fit for all parties.
An executive’s future marketability inside private equity can dramatically rise or fall based on a single career move.
Many otherwise capable CFOs have experienced career derailment after failing to uncover fatal organizational flaws during the diligence process.
The decision to take on any PE-backed CFO opportunity deserves intense deliberation, yet many candidates settle for cursory diligence. These individuals falsely believe sponsors will be forthcoming about every relevant complexity associated with the role. This oversight has stymied careers and destroyed fortunes in would-be wealth creation.
Sponsors typically default to providing minimum levels of information unless an executive actively drives for deeper diligence. While this is not done with malicious intent, it is the reality.
Candidates cannot rely on the firm to volunteer all the materials and information required to make an educated decision, nor can they expect to derive a true understanding of the opportunity purely via internal perspectives.
Determine the Company’s Risks and Momentum
Obtaining an accurate snapshot of current financial performance is a baseline objective of adequate diligence.
Yet viewing a company frozen in time reveals little about its underlying momentum. Many executives fail to appreciate this nuance, only to enter a deal with their equity underwater.
The situation is almost always more challenging than first meets the eye. Quarterly and yearly trends provide invaluable context around the company’s financial performance. In terms of financial documents, a review of the recent board packet and the last four quarters’ results constitute table stakes. ...