good morning. Private equity (PE) firms have ramped up investments after a period of caution, but are now more selective, prioritizing resilient long-term opportunities in sectors such as technology, healthcare and energy. At the same time, portfolio company CFOs are facing increasing pressure from PE sponsors to be “exit ready” and ensure their companies have AI-enabled finance capabilities.
Accordion, a consulting firm specializing in private equity, has released a report titled “The State of Exit Readiness in Private Equity.” Exit preparation refers to strategically preparing for a sale or public offering, emphasizing strong financial performance, reliable growth potential, and operational improvements to attract buyers.
Almost all sponsors surveyed (97%) expect CFOs to maintain an “always ready to exit” attitude, but only 20% of CFOs say they actually operate that way. Most (61%) only enter exit mode when a sale window appears. According to the sponsor, a compressed sprint could reduce valuations by 1 to 3 turns of exit multiple.
Sponsors comprehensively define exit readiness, including proactive value creation measures, integrated systems, and a trusted equity story. However, CFOs surveyed tend to focus on tactical tasks such as diligence packs and audit-ready financial management. Only 32% include value creation in their definition.
More than 80% of sponsors want to start preparing for an exit 12 to 24 months before a sale, but half of CFOs start just 3 to 6 months in advance. More than 70% of sponsors said reserve compression was responsible for lower deal multiples, and 39% cited hasty exits as the cause of post-sale adjustments.
“Given the Fed’s recent interest rate cuts, the resurgence of dry powder, and a potentially multi-year exit cycle, those who view preparation as a last-minute exercise risk missing out on the moment,” Accordion CEO Nick Leppard said in a statement.
The findings are based on a survey of 200 senior executives at PE sponsors and 200 CFOs at PE-backed companies with annual revenues of more than $50 million.
Another important finding is the growing importance of AI. 85% of buyers are now considering AI-powered financing when evaluating businesses. Sponsored CFOs that incorporate AI in planning, forecasting, and reporting are twice as likely to achieve smooth exits and higher valuations, according to Accordion.
In the world of PE, finance executives are under daily pressure to achieve double-digit returns and must be bold and aggressive. CFOs surveyed cited common exit challenges, including bandwidth constraints, fragmented systems, unclear sponsor expectations, and lack of previous exit experience, all of which sponsors say directly impact valuations.
Pamela Stern, managing director and head of commercial excellence at Accordion, advised that CFOs need “a strategy for continuous or ‘always on’ exit readiness.” According to Stern, this requires embedding exit discipline into daily operations, aligning sponsors and finance teams around common value creation goals, and ensuring that optimization opportunities are not missed.
Cheryl estrada
sheryl.estrada@fortune.com
***Upcoming events: Join us for our next Emerging CFO webinar. Optimization of human and machine workforcewill be held in partnership with Workday on November 13th from 11am to 12pm ET. The speakers are: Nitin MittalPrincipal, Global AI Leader at Deloitte; sad strickerCFO of INRIX.
Find out how leading CFOs are reimagining the future of work in the age of agent AI. This includes when to deploy AI agents to accelerate automation, how to balance the ROI tradeoffs between human and digital talent, and the upskilling strategies CFOs are applying to optimize their workforce for the future.
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leader board
Michelle AllenCFO and Head of Strategy Wyndham Hotels & Resorts (NYSE: WH) plans to leave the company to pursue new career opportunities outside of the hotel industry. Curt Albert, currently Finance Director and Head of Financial Partnerships and Planning, has been appointed Interim CFO, effective immediately. Wyndham will conduct a search for a permanent CFO and will consider both internal and external candidates. Mr. Allen will remain in an advisory role at Wyndham until the end of 2025.
Max Tunnicliffe Appointed CFO and Senior Vice President. Fasten Company (NASDAQ: FAST), effective November 10. Mr. Tunnicliffe most recently served as CFO of Beko Europe, a leading consumer electronics company. Previously, he held various senior financial leadership roles at Whirlpool Corporation, including Director of Internal Audit, Vice President of Strategy, and CFO of Asia Pacific.
big deal
“AI in the Workplace: From Vision to Value” is a new report by software company monday.com, which partnered with Nielsen to survey 500 directors in the US and UK. The research topics ranged from drivers of AI adoption to sentiment about using AI, and data was combined with insights from monday.com’s workflows.
94% of directors said AI is already being used across their organizations, with more than half of departments having it embedded in at least 50% of their workflows.
Leaders say their top drivers for AI adoption are speed, accuracy, and productivity, but “innovation” is not in the top five. Meanwhile, 40% say privacy and security are the main barriers to widespread adoption.
While only 38% of respondents cited workforce reduction as a motivation for implementing AI, the majority said AI helps teams do less manual work and take on more strategic responsibilities.
According to the report, large enterprises lag behind small and medium-sized enterprises in AI usage per employee, citing regulation and ROI concerns as the biggest barriers.
even deeper
overheard
“We’re seeing rich people buying back into cities because they miss the cities. They miss the activities.”
—Pamela Liebman, CEO of Corcoran Group. luck In an interview. Liebman argues that the decision to return to a metropolitan center like Manhattan has less to do with RTO and more to do with fear of being left behind in an uncertain job market.
