Partner Article

CFOs concerned over financial future

Chief Financial Officers (CFO) of private-equity backed businesses are feeling less optimistic about the growth in their company’s revenue than in 2011, according to new statistics.

A survey by business advisory firm Deloitte found that 54% of CFOs are optimistic about revenue growth over the next year, in comparison with 70% in 2011.

Growing revenue is the number one priority for CFOs over the coming year, followed by the protection of margins through cost-cutting. Market uncertainty is reflected by a decline in plans to exit a business in the next 12 months from 18% in 2011, to only 4% of those surveyed in 2012.

Paul Feechan, office senior partner at Deloitte in Newcastle comments: “The results of the survey very much reflect current market sentiment and we have seen a dip in the overall outlook for the coming months.

“However, it is good to see that, despite the current recessionary woes blighting the UK and concerns around the Eurozone, 54% of CFOs of private equity-backed businesses are optimistic about revenue growth over the next 12 months and a number of them remain focused on preparing the business for sale.”

For those considering an exit, a trade sale was the most anticipated route for CFOs, as 62% of respondents believing a sale to a trade buyer, internationally or in the UK would be the most favourable route. However secondary buyouts were also popular, with many expecting to make a sale to another private equity owner.

Many CFOs continue to look for capital from their private equity investor, following strategic input at board levels and M&A skills. Almost 70% of CFOs were below their original management buy-out plans in terms of earnings before interest, taxes, depreciation, and amortisation, which is commonly used to value a company. Only 10% of firms were ahead of target by more than 10%.

Mr Feechan added: “Historically, funding has been the main requirement of a private equity house from an investee company.

“However, as markets have become more challenging in recent years, we have seen a shift in focus to a greater emphasis on strategic and consultative advice.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .