The Private Equity CEO/CFO Report - Dec '24: Optimism + Realism

THE HIGH LEVEL

The Macro trends continue to move toward an active 2025 as exit pressure builds, IPO markets open and there are signs of some political stability following the November elections. IPO markets are favoring the stability of PE-backed companies over VC’s speculative bets, while GPs grapple with aging funds that need exits or extensions. On the fundraising side, momentum is slowing as timelines stretch and megafunds stall, even as dealmaking starts to pick up pace. We continue to see professional services firms staffing for a strong 2025 and top PE Executives are as in demand as ever, but the bar for "top" is continually rising.

Here are our curated Private Equity CEO & CFO highlights for DECEMBER 2024

• 5 Trends That Will Shape Private Equity in 25: Astira, BCI, Blackstone, TPG, TRST
• Despite Challenges, Exits Expected to Rise in ‘25 - Blackstone/Cambridge?
• The Four Archetypes of the Private Equity Portfolio Company CFO - BDO
• 5 Challenges for Boards in 2025 - NACD
• Why More NFL Teams Might Pivot to Private Equity - Yahoo
• The Outlook for PE in 2025 - Pitchbook
• Private Equity's PR Problem - Patria Private Equity Trust
• LPs Demand Transparency in Private Equity - Private Funds CFO?
• The Democratization of Private Equity? - Moonfare
• Trends in Private Equity Professionals and Compensation - Heidrick & Struggles

PE-Xcelerate is forming a wait list for our next PE CHRO Accelerator and our next PE CFO Accelerator, go to pexcelerate.com to learn more.

Here's what our CFOs are saying about us:

“I also wanted to take a moment to express my profound gratitude for the PE class—it has truly been a breath of fresh air. The insights and frameworks you’ve shared have already made a tangible impact on how I approach my role, prioritize my time, and even how I articulate my contributions in self-reviews. I’m genuinely inspired by the clarity and structure this class has provided.I’ve been in awe of how much this has reshaped my thinking and elevated my ability to stand out.”

Enjoy this collection of PE CEO/CFO articles for DECEMBER 2024. Please email me with errors, typos.

1. 5 Trends That Will Shape PE in 25: Astira, BCI, Blackstone, TPG, TRST - Buyoutsinsider

Buyouts Insider interviewed 5 top PE Executives for their views on what to expect in 2025:

• Focus on Value Creation - The era of relying on financial engineering and multiple expansion is over. Private equity firms must focus on operational improvements, cost efficiencies, and accelerating growth to drive returns. This shift highlights the importance of making companies fundamentally stronger and more attractive to future buyers.
• Liquidity Pressures Demand Strategic Exits - LPs’ demand for liquidity is intensifying, creating urgency for sponsors to monetize assets. However, the backlog of unsold assets and elevated valuation expectations require creative approaches such as GP-led secondaries, hybrid-structured capital, and strategic sponsor-to-sponsor trades.
• Carve-Outs and Structured Deals are Key Opportunities - Corporate carve-outs and innovative deal structures continue to provide significant value. Sponsors with disciplined approaches and sector expertise can capitalize on proprietary opportunities, especially as corporates realign their priorities and seek partnerships.
• Fundraising Recovery Will Be Slow - Fundraising is unlikely to return to peak levels for several years, given LP over-allocations and weak distribution flows. Sponsors need to build trust through consistent DPI performance, robust investor relations, and tailored strategies to engage LPs in a challenging environment.
• Adaptation is Essential in Debt Management - High interest rates and tighter credit conditions require sponsors to proactively manage debt structures. Preferred shares, private credit markets, and refinancing will be critical tools for preserving flexibility and ensuring value creation in over-leveraged portfolio companies.

2. Despite Challenges, Exits Expected to Rise in ‘25 - Blackstone/Cambridge

Private equity is gearing up for a big year in 2025, with Blackstone predicting its exits could more than double. Martin Brand, who leads North America private equity at Blackstone, shared his optimism at the Reuters NEXT conference, citing an improved M&A environment and a reopened IPO market. "The IPO markets are open, and the cost of capital has come down," Brand explained. Deals from 2021—a high point for private equity activity—are maturing, and many are ready for exit. With blockbuster IPOs like Lineage Logistics and Standard Aero on the horizon, the stage is set for a year that could finally deliver some much-needed momentum.

That said, it’s not all smooth sailing. Private equity is still digging out of a $3 trillion backlog of aging deals after three years of sluggish exits. In 2024, firms cashed out just half the value of a typical year, with many deals selling at a 10-15% discount to internal valuations. To navigate this, firms have leaned on continuation funds, which now make up 14% of exits. While helpful, it’s a Band-Aid solution. Experts warn it’ll take years to fully align valuations with the market. Still, with better conditions on the horizon, 2025 offers a real chance for private equity to turn the corner—and maybe even thrive.

3. The Four Archetypes of the Private Equity Portfolio Company CFO - BDO

Private equity (PE) portfolio companies (portcos) demand CFOs who align closely with their investment thesis and lifecycle stage. The CFO's role is critical to executing vision, navigating transactions, and delivering value to limited partners. BDO identified four archetypes of PE portco CFOs and fit for specific situations:

The Standard-Setter This CFO is the go-to for early-stage or founder-led companies needing strong financial foundations. With an accounting background and a knack for process improvement, they establish controls, enhance reporting, and bring operational rigor. Detail-focused and risk-aware, they thrive in immature financial environments, building scalable systems and efficiency for future growth.

The Buy-and-Builder Perfect for M&A-driven growth, this CFO shines in fast-paced acquisition environments. With PE experience and integration expertise, they execute add-ons, streamline operations, and ensure cultural fit. Their focus on KPIs and close collaboration with CEOs drives synergies and positions the company to scale during the holding period.

The Exit Strategist When it’s time for a major exit—IPO or strategic sale—this CFO takes the lead. With experience in public markets and investor relations, they manage capital raises, guide complex transactions, and maximize value. Strategic and charismatic, they’re essential for high-stakes exits, ensuring investors and stakeholders see the best returns.

The Turnaround Specialist In financial distress, this CFO steps in to stabilize and rebuild. With deep expertise in restructuring and cash flow management, they improve liquidity, renegotiate with lenders, and optimize balance sheets. Decisive under pressure, they transform operations and ensure the company is ready for recovery and growth.

We've launched our fractional, advisory and interim network and have just placed our first executives: go to www.synccxo.com for more.

4. 5 Challenges for Boards in 2025 - NACD

1. Going on Offense or Defense (or Both) - Balancing risk-taking for growth and maintaining trust as a safeguard.

Action Points for Boards:

• Define scenarios where rapid execution is critical versus those requiring a conservative approach.
• Develop dynamic decision-making frameworks to support "fast and slow" action plans.
• Encourage management to pilot digital transformation initiatives, scaling successes while managing risks.

2. Engaging on Social and Political Issues - Addressing societal expectations while navigating divisive environments.

Action Points for Boards:

• Establish clear guidelines for engagement aligned with the company’s values and stakeholders’ priorities.
• Equip the CEO and leadership with strategies for measured responses to social and political events.
• Assess the risks and benefits of public stances, focusing on alignment with the company’s long-term goals.

3. Committing to Long-Term Strategy in a Shock-Prone World - Sustaining focus on strategic bets amid disruptions and short-term pressures.

Action Points for Boards:

• Revisit and stress-test the long-term strategic plan against plausible future scenarios.
• Align incentives for management and stakeholders around long-term value creation.
• Encourage flexibility in execution while ensuring clarity on enduring priorities.

4. Maintaining Focus Amid Expanding Governance Scope - Avoiding dilution of focus as agendas and responsibilities grow.

Action Points for Boards:

• Streamline meeting agendas to prioritize mission-critical topics.
• Leverage technology and tools to monitor emerging issues efficiently.
• Delegate operational oversight to committees, reserving board discussions for strategic decision-making.

5. Recruiting for Expertise vs. Leadership - Balancing specialized knowledge with broad leadership experience.

Action Points for Boards:

• Conduct a gap analysis of the current board composition against future needs.
• Consider adding advisory board members with deep expertise for emerging areas like AI or cybersecurity.
• Foster an ongoing development program for directors to build competencies in new domains.

5. Why more NFL teams might pivot to private equity in 2025 - Yahoo

The Miami Dolphins and Buffalo Bills just made history as the first NFL teams to sell minority stakes to private investment firms, following league approval in December 2024. This move is a game-changer, creating new ways for teams to fund big-ticket projects like stadiums.

On the Yahoo Finance Sports Report, NFL reporter Jori Epstein pointed out that the Buffalo Bills’ stake sale came as their stadium budget shot past expectations. Epstein suggested that private equity could become the go-to funding option for teams wanting to fast-track stadium builds without taking on heavy debt.

While this approach might impact future revenue, it offers a quicker way to access capital for urgent needs. As the NFL leans into private equity, everyone will be watching to see how it shapes the league’s business and long-term financial playbook.

6. The PE Outlook for 2025 - Pitchbook

Pitchbook expects a rise in PE-backed IPOs driven by more GPs tapping strong public markets to realize investments, but warns of rising pressure on fund life cycles, with analysts anticipating that more funds will hit the maturity wall as vintages from historically active fundraising periods begin to wind down. Pitchbook looks at 4 key trends for '25:

IPO Market Shift: Private equity-backed IPOs are projected to capture 40% of U.S. IPO capital in 2025, highlighting investor preference for the stability and proven profitability of PE-backed companies over the speculative nature of VC-backed firms.

Maturity Wall Challenges: Over half of active PE funds are six years or older, creating pressure for GPs to liquidate assets or extend fund terms as a growing number of funds reach their maturity walls.

Fundraising Decline: PE fundraising is expected to decline in 2025 due to elongated fund closure timelines, reduced megafund activity, and depleted dry powder, even as dealmaking picks up.

Private Debt Growth and Consolidation: Private debt AUM has surged nearly fourfold in the last decade, reaching $2 trillion in 2023, with top 10 managers now capturing 33% of cumulative capital raised, signaling industry consolidation driven by M&A activity.\

7. Private Equity's PR Problem - Private Funds CFO

Private equity has grown into a $10 trillion industry, but it still struggles with a reputation problem, says Alan Gauld, manager of the Patria Private Equity Trust. He notes that outdated stereotypes, like the idea of private equity being all about asset stripping and aggressive cost-cutting, continue to linger despite not reflecting the reality of the industry today.

One of the big challenges, according to Gauld, is private equity’s lack of transparency. Managers are often reluctant to share detailed portfolio information, worried it might give competitors an edge. This secrecy, combined with lingering misconceptions, has kept some potential investors on the sidelines, even as institutional money continues to flow into the market.

Still, Gauld points to private equity’s long-term performance and unique benefits. He also highlights how private equity’s hands-on management style often drives faster growth than public markets can achieve. Companies like Uber, which stayed private longer to scale before going public, showcase how private equity fosters innovation and expansion.

Gauld sees private equity as a misunderstood but essential investment tool, offering diversification and access to transformative businesses that can’t always be found in public markets.

8. LPs Demand Transparency From Private Equity?- Private Funds CFO

• Transparency Expectations: Over 86% of LPs believe increased transparency and clarity in distribution timing and waterfall calculations are critical, particularly amid slowdowns in exits and liquidity events.
• Top Concerns: LPs are scrutinizing hurdle rates, clawback provisions, and the fairness of carried interest calculations. A lack of clear information raises fears of misalignment between LP and GP interests.
• Pushback on Provisions: Nearly 80% of LPs have pushed back against “unreasonable” waterfall provisions, prompting GPs to adopt more LP-driven modifications, such as tiered distribution mechanisms and higher hurdle rates.
• GP Adjustments: Almost half of GPs anticipate devoting significant resources to address LP demands, with many planning upgrades to tech infrastructure to enhance transparency and reduce calculation errors.
• Outsourcing Trend: The majority of LPs (87%) prefer funds that outsource waterfall modeling and calculations to third-party specialists, prompting GPs to prioritize outsourcing to meet investor expectations.

9. The Democratization of Private Equity? - Moonfare

Moonfare is democratizing PE investment and has launched a direct investing feature for ultra-high-net-worth individuals, allowing targeted investments in late-stage companies like Anthropic Softwares Pvt Ltd and Sakana Research The platform offers curated deals with reduced fees, leveraging its 250 GP relationships and due diligence by private equity veterans. And we're not just highlighting this because, Madhumitha Murali , their FD, went through our PE CFO Accelerator or that their investors operations team serves as faculty on our Accelerators, but we partially are...

10. Trends in Private Equity Professionals and Compensation - Heidrick & Struggles

Professional Preferences

• Private equity professionals are prioritizing firms offering growth opportunities and strong cultures.
• Decisions on new roles are heavily influenced by firms' track records, DPI (Distributions to Paid-In Capital), fund deployment status, and progress in fundraising.
• Many professionals are willing to trade higher compensation for long-term upside or more stable environments with less reliance on fundraising.

Market Dynamics

• The private equity industry faced significant disruption in 2024, marked by fundraising challenges and firm consolidations.
• Layoffs have created a pool of displaced professionals, though it remains unclear if they will stay in the private equity sector.
• Despite increased mobility among professionals, sourcing highly skilled and proven talent remains a challenge.

Compensation Trends

• Base Salary Growth: 62% of respondents reported higher base salaries in 2024, with 48% of increases being modest (10% or less).
• Bonus Trends: 69% of professionals received larger bonuses in 2023 compared to 2022.
• Bonuses exceeding 50% of base salary rose slightly, from 8% to 9%.
• Compensation trends highlight modest but steady growth, reflecting cautious optimism amid a disrupted market.

That's all for this month, email me at [email protected] with questions.