The following is a guest post from Dan Ellis, a managing director at executive search firm Townsend Search Group. Opinions are the author’s own.
The modern CFO wears many hats — including strategic partner, technology advocate and value creation specialist. This ongoing expansion of the CFO role impacts how companies approach CFO recruitment and hiring decisions. Let’s explore three trends that continue to shape the recruiting and hiring of finance leaders within private equity-owned, middle-market companies.
Value creation-focused CFOs
In today’s high-interest rate environment, many companies are shifting its focus from financial engineering to value creation. We see this shift playing out and influencing decision-making for many of our clients, particularly at private equity-sponsored companies. For example, according to Bain & Company’s private equity 2024 midyear report, the 25 largest private equity funds are holding twice as many portfolio companies as they did a decade ago, largely due to fewer exit opportunities resulting from a slowdown in M&A and IPOs. This places a premium on CFOs who can drive operational improvements and sustainable growth — in other words, organic value creation.
Value creation involves a wide range of strategies aimed at enhancing a company’s long-term operational performance, competitive positioning and growth prospects, rather than focusing merely on short-term profit boosts. This might include streamlining operations, expanding into new markets, or developing innovative products and services that require investment and typically pay off over longer timescales.
For CFOs at portfolio companies, this means going beyond traditional financial management. Companies are now seeking finance leaders who can:
- Identify opportunities for operational efficiency and cost optimization without compromising long-term growth
- Develop data-driven strategies for entering new markets or customer segments
- Collaborate with other departments to drive innovation and diversify revenue streams
- Navigate complex business environments and make informed decisions in the face of uncertainty
However, finding CFOs with this skill set presents a challenge. According to a recent BDO report, 47% of CFOs at portfolio companies reported understaffing in critical roles. This talent shortage has intensified the competition for finance leaders and implementers who can effectively drive value-creation initiatives.
For CFOs looking to position themselves for success in today’s market, this trend underscores the importance of developing a broad skill set that goes beyond financial acumen. Experience in operations, strategy, and change management enhances a candidate’s appeal for value-creation-focused companies.
1. The tech-savvy CFO
As technology continues to revolutionize the finance function, portfolio companies are increasingly seeking CFOs who can drive technological innovation within their departments. In our experience, this trend is particularly evident in the growing demand for CFOs with experience in implementing or overhauling Enterprise Resource Planning (ERP) systems and, in some cases, integrating artificial intelligence, for greater efficiency.
However, it’s important to note that being a tech-savvy CFO doesn’t necessarily mean having any sort of meaningful technical know-how. What’s important is possessing change management skills and the ability to drive organization-wide adoption of new technologies. Indeed, a new ERP, for example, is only as good as the employees who actually use it.
This presents a delicate balancing act for PE-backed portfolio companies looking for a new CFO. While they need someone who understands the importance and capabilities of technology, they must be careful not to overburden their finance leaders. Depending on the organization’s size and complexity, it’s often more effective to pair a strategically-minded CFO with strong technical support, either in-house or outsourced, who can help with technological implementation.
For CFO candidates, this trend highlights the importance of staying current with technological advancements in finance. While you don’t need to be a tech expert, demonstrating a track record of successful technology implementations and a forward-thinking approach to digital finance can enhance your appeal to potential employers.
CFOs who can bridge the gap between finance and technology, while also managing the human aspects of technological change, will continue to be in high demand in the coming years.
2. CFO as M&A specialist
In the private equity landscape, CFOs play a crucial role in driving value creation through mergers and acquisitions. This includes both the acquisition of complementary businesses to build enterprise value (i.e., buy and build) and, ultimately, positioning the company for a successful sale.
For PE-backed companies, in-demand CFOs possess an M&A skillset:
- Acquisition expertise: Identifying, evaluating and integrating strategic acquisitions to enhance company value.
- Sale preparation: Structuring the company’s financial structure and operations to appeal to potential buyers.
- Process management: Orchestrating the complex steps involved in both acquisitions and sales, including due diligence, data room management and timeline adherence.
- Stakeholder communication: Serving as a key figure in management presentations and interactions with potential buyers or acquisition targets.
While the CEO may be the face of the business, the CFO is often the linchpin in M&A transactions. They hold the detailed financial knowledge that buyers scrutinize and are instrumental in structuring deals to maximize value.
Demonstrating expertise in both buy-side and sell-side M&A, and showcasing successful transaction experiences — particularly in meeting or exceeding sponsor timelines and value expectations — is a powerful difference maker.
3. Balancing priorities: The myth of the “do-it-all” CFO
Given these trends, it might seem that companies need a superhuman CFO who excels in traditional finance, value creation, technology and M&A. However, this “do-it-all” approach can be counterproductive and unrealistic.
Rather than seeking a carbon copy of their previous CFO or chasing the elusive “unicorn” candidate with every conceivable skill, companies are focusing on their top priorities and considering alternative strategies to fill skill gaps.
Without a doubt, every CFO needs a solid financial base of skills and knowledge. But beyond that, companies are identifying its pressing needs and finding someone who can tackle those head-on — often with the help of others. For instance, a tech-savvy controller or CIO can support a CFO who excels in strategic financial planning but lacks deep technological expertise. Rather than looking for someone who can do it all (and the truth is, no one can), companies are focusing on finding a CFO who excels at building relationships across departments to leverage the expertise of others, such as IT for technology initiatives or operations for value creation strategies.
This balanced approach allows companies to find CFOs who meet their most critical needs while building a robust ecosystem of support around them. This strategy not only makes the hiring process more manageable but also sets the CFO and the company up for long-term success in an ever-changing business environment.
The role of the CFO is evolving rapidly. No single CFO should be expected to excel in every area that touches the finance function in a PE-backed company. Looking ahead, we anticipate the trends discussed in this article to continue to shape portfolio company CFO hiring decisions. Accordingly, the CFO of today — and the future — is much more than a number cruncher. By understanding and adapting to these trends, finance leaders can turn today’s challenges into tomorrow’s opportunities, driving growth and success in the years to come.
