Better to be CFO at subsidiary of fortune 50 or private equity portfolio

A recruiter recently called me with two potential positions. I know the recruiter fairly well and he's brought me things before, so I trust him when he says I'm the type of candidate both are looking for and my chances of getting my choice are well above average.

Both positions are CFO roles; the first is of a multibillion subsidiary of a fortune 50, with the overall cfo two notches above me.The other is a smaller company where I'm theoretically the top guy but really it's part of the private equity portfolio and the investors rule.

In my working career thus far I spent about 5 years at a portfolio company and about 10 at a fortune 10, and a few at a fortune 300, plus a mix of other things, so I'm familiar with the work environments and management challenges inherent to each, though perhaps not in recent times.

My bias is toward the fortune 50 job but I've always wanted to get back into PE "someday". I probably have 10 solid years ahead of me in my career, more if it becomes more interesting/broad or goes into general management. I need about 3-4 years at my current earning level to have "enough" to retire, but the faster I get enough and the more I beat enough by the happier I'll be

So, after that long winded intro, my questions are:

1) what sort of questions should ask the PE company about comp? What's good and what's bad in terms of buyout structures, etc? The entirety of my executive experience has been at mega corps so I'm out of my element here and I don't want to negotiate poorly.

2) is there life after PE portfolio senior management? I get the impression you (maybe) get a big payday and then you retire, and getting back into a mega corp is impossible and into another PE only slightly less impossible. Feels more like a capstone job to take once I've hit my "enough" vs taking it with an expectation to get my "enough" from it

3) what would you choose and why?

Thanks!

 

Great questions. I have held both roles in a CFO capacity, and currently the CFO of a portfolio company owned by a PE firm that has $56B under management. I was previously division CFO at Disney, BBC Worldwide, and Hasbro.

Regarding question #1, 4 things to consider: base, bonus, equity or LTIP, and earnout. 50% bonus based upon targets is where I would start (make sure the targets are achievable and something you can affect). Bonus should have minimum threshold (80%-90% of target) and scales up if over achieved (110%, 125%, etc). Targets usually based on EBITDA, cash and other operating metrics. Make sure part of the bonus is discretionary so you can earn something if you don't hit targets. You have to make sure you trust the C-Suite and that they can deliver. For equity, I have seen CEO's get around 5% with CFO's in the range of 1%-3%. Remember that you need to make sure that there is equity currently, or that it can be created and achieved. 50% of zero equity is $0. Also make sure there are no preferred shares or accrued dividends that can screw you. My last PE gig, the EBITDA growth did not keep pace with dividends and preferred shares "PIKs". I knew that my equity was never going to be in the money. Sometimes you trade salary for equity. Make sure that you can get there, that's where the earnout comes into play.

For question #2, I would say absolutely there is life after PE. After Disney, I went to be CFO of a portfolio company owned by a $9B PE firm. After I left there, I became divisional CFO at two multibillion companies.

For question #3, I would choose PE. You are in the C-Suite and you run it. However, you do eat what you kill. Meaning that there is no cash lifeline, unless you beg the PE guys for more (which I don't recommend). There is less bureaucracy than a large corporation, but you need to perform. They leave you alone if you perform. In a corporation, I just hated all the cycles and layers of decision making (even though I was one layer away from the corporate CFO).

Hope this all help, but this is just my perspective.

 

Very helpful, thanks! Excited to see how things develop. I'll probably be back with questions soon.

 

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Good topic. I couldn't make the decision bAsed strictly on ownership. I have had the fortune/misfortune of experiencing both at their best and worst. You already know both will tell you what you want to hear, so the real answers will come from your senses or gut. You can ask the routine questions during the pony-show, but your decision may be based on the things you observed, and questions never asked. Do you look for signs of financial weakness or prosperity, stock, credit, mood in the boardroom, expressions on faces, body language, and if the Directors are reasonable, and like you, or hot-heads. Do you like the product or market? I suppose it depends what type of person you are; I think fit is important.

 

You are absolutely right. Board harmony is extremely important. I have been on both sides where a subset of Directors were against each other. Disruptions causes uncertainty and the ability to execute. One other thing, if you make it beyond initial rounds, it is not uncommon to ask and sign an NDA to get financial statements to review. Best to get audited financial statements with opinion, footnotes and disclosures. Financial information may be redacted, but it is better than nothing. Also ask about capital structure and debt.

 

I've always preferred to own the business.

A good owner is also great CFO.

 

Oh so true, but I'd ask for the last two fiscal years and (if you're daring) current year interim financials.