As private equity firms aggressively seek new opportunities to grow their portfolios and their business, they are keenly aware of the pressures expansion and investor requests are placing upon their organizations. Given the significance that financial operations play at private equity firms, chief financial officers (CFOs) often occupy a pivotal role as the ones responsible for making certain that their firms maintain their competitive edge by operating at a high state of operational resilience and efficiency. CFOs have the key responsibility for technology transformation, oversight of talent and pursuing outsourcing arrangements that would allow their organizations to behighly efficient and scalable.
Thanks in large part to the high returns generated by most private equity asset classes, the private equity industry continued to raise capital at record levels in 2017, bringing in more than $640b in new commitments. Dealing with the increased asset levels has come with certain challenges for CFOs. Investors’ demands for higher returns at lower fees, internal and external requests for more customized portfolio analysis, and dealing with increased regulatory and compliance demands have required CFOs to re-evaluate their finance functions to manage these increased demands. In fact, the demands are only likely to intensify in coming years as the competition for private equity capital continues to grow.
In this, our fifth annual Global Private Equity Survey, we explore the different paths that CFOs are taking to make certain that their firms continue to become even more efficient in their operations as they grow. In last year’ssurvey, we noted that private equity firms had assembled the raw materials and developed a blueprint to address these operational challenges. Now as CFOs across the board begin taking steps to implement more scalable and efficient operations, it is becoming increasingly clear that private equity firms are seeking operational success via different pathways depending on their specific needs.
For example, larger private equity firms, those with assets under management (AUM) in excess of $15b, consider technology, transformation and talent development as key priorities, while midsized firms are investing in technology where they can but are taking on the increased workload with their people if it is deemed to be more cost-efficient. On the other hand, smaller firms, those with AUM of less than $2.5b, are more likely to invest in human capital rather than implement new technology and are more likely to view outsourcing as a viable alternative.
In last year’s survey, we noted that private equity firms had assembled the raw materials and developed a blueprint to address operational challenges. Now as CFOs across the board begin taking steps to implement more scalable and efficient operations, it is becoming increasingly clear that private equity firms are seeking operational success via different pathways depending on their specific needs.
