CFOs of private equity-backed businesses are increasingly optimistic about future growth in their company’s profits, according to a survey by Deloitte. Some 70% of CFOs surveyed stated that they were optimistic about profit growth over the next 12 months compared to 55% surveyed during the same period last year. Cost-cutting – the main priority for CFOs last year, fell down the list of priorities (11%).
The survey of nearly 60 chief financial officers of private equity-backed businesses was undertaken to determine their priorities for the year ahead and the likely sale plans for the business. Despite the resurgence in M&A activity during 2010, the majority of CFOs surveyed (51%) did not expect current private equity investors to sell the business until 2013. Only 18% expected a sale in the next 12 months.
Trade sale remains the most anticipated sale route for CFOs, with 49% of respondents believing sale to a trade buyer, either internationally (33%) or in the UK (16%) to be the most likely exit route. However, the trend of secondary buyouts is set to remain popular among private equity investors, with 35% of those surveyed expecting a sale to another private equity owner.
Emma Cox, lead partner for the Deloitte programme for private equity-backed businesses, says: “The results of the survey indicate an uptick in optimism amongst CFOs of private equity-backed businesses. It appears that the days of cost-cutting and concerns around bank covenant compliance are behind most CFOs, with a renewed focus on revenue growth and preparing the business for sale.
“Interestingly, despite the strong resurgence in private equity deals in 2010, few of the CFOs surveyed anticipate a sale of their business over the next 1 to 2 years. Nonetheless, CFOs are increasingly focused on preparing their businesses for sale and most expect to start the planning process at least 12 months prior to sale. Optimism around M&A activity has rebounded but, in our view, careful planning and meticulous preparation remain key to a successful exit process.”
