Dive Brief:
- Just over half (51%) of CFOs and chief operating officers of U.S. private equity firms said they were concerned about a global recession, with 49% of those firms also expressing concerns about deal flow, according to the 2023 EY Global Private Equity survey.
- As private equity CFOs and COOs navigate the current volatile landscape, 56% said they are focused on talent management when it comes to top strategic priorities aside from asset growth.
- “As the industry is continuing to grow, firms are really building out their infrastructure internally,” said Kyle Burrell, partner at Ernst & Young and contributing author of the survey in an interview with CFO Dive. Additionally, “CFOs are really embracing their role as strategic leaders in the organization. They know now they need to be more data focused, agile and commercial,” in today’s economic environment, he said.
Dive Insight:
With growing concerns of a possible recession amid slowing growth in the private equity industry, finance leaders are turning to talent management and embracing their evolving list of responsibilities in order to mitigate some of these concerns, the survey said.
“The industry in general is coming off a record-setting fundraising year, which really increased the amount of assets these private advisors were managing,” said Burrell.
With this growth, however, comes concern. Fifty-one percent of survey respondents in the U.S. cited a global recession as their biggest worry for the industry.
Firms expressed equal concern about the potential that over saturation could dry up deal flow if a global downturn impairs growth.
Coming off of such a strong fundraising year, there are an increased number of private equity advisors fighting for the same business and trying to get deals. Therefore, there is possibility the market may dry up, according to Burrell. “PE CFOs are trying to figure out how to stabilize their businesses for that potential,” he said.
Focusing on talent management and taking on a more strategic role in their firms are the top priorities of finance leaders in the PE space, especially during economic uncertainty, the survey said.
“What we are seeing,” said Burrell, “is CFOs (of PE firms) taking a more strategic role because they’re really now the steward of the data, harnessing that data, and providing it to stakeholders and helping evaluate whether a strategic transaction makes sense or not,” he said.
This particular type of CFO is different from those in the role 10 years ago, “who were tasked with overseeing the audits, making sure the accounting is right, reporting limited partners, helping with evaluations,” according to Burrell.
Firms are really re-focusing on their talent management strategies in order to do this. “Hiring, engaging and retaining their professionals and their top talent is really paramount for future success,” said Burrell.
Among the largest firms, 76% said retaining talent was critical, while 60% of smaller firms emphasized hiring the right talent.
Talent management, whether that is hiring to scale to growth, retaining top talent or implementing diversity, equity and inclusiveness programs, was consistent among firms as a means to compete in the industry, the survey found.
