Private Equity CFOs and the COVID-19 Recovery

by: Atta Tarki , Ken Kanara, Gustav Brown Steven Haug


Key Highlights:

ECA Partners today announced the results of its second survey of CFOs from Private Equity (PE) owned companies. Whereas the first survey demonstrated the severity of COVID-19’s impact on company finances, the results of the second survey show that, for the PE sector at least, the recovery is already in full swing.


Selected findings include:

  • Since our last survey, PE CFOs have clearly shifted focus from cash management and divestments to acquisitions, new product launches and hiring
  • The vast majority of CFOs either plan to increase spending over the next 90 days (44.8%) or keep it at current levels (46%). Only a very small number of CFOs (9%) plan further cuts
  • A majority (62%) of CFOs expect to spend more on hiring over the next 90 days than the preceding 90 days; smaller but still significant proportions expect to do the same for salaries and wages (42%) and capital expenditures (34%). Less than 10% of respondents expect to spend less on hiring, salaries and wages or capital expenditures, respectively
  • A large majority (87%) of CFOs report that salaries and wages have been restored to pre-COVID levels



ECA Partners recently conducted its second survey of PE CFOs to assess how the COVID-19 downtown and nascent recovery are affecting financial priorities and allocation decisions.


Private equity in the US accounts for more than $1 trillion in value and employs approximately 9 million Americans, with more $600B in wages earned in 2018. It has been one of the main drivers – and beneficiaries – of economic expansion since 2009. Like other sectors of the economy, however, PE-owned companies have been deeply affected by domestic closures and other restrictions enacted in response to the COVID-19 outbreak, as well as from the disruptions to the global supply chain, ongoing declines in global trade, fast-rising unemployment and general loss of consumer confidence that define the current economic climate. In our first survey, we found that 61% of PE-backed companies had cut spending by more than 10%, and 17% had cut spending by more than 30%.


The survey posed a series of questions to CFOs at PE-backed companies on the following themes: (1) how COVID-19 has impacted their financial priorities; (2) how they project COVID-19 to impact future spending allocation; and (3) when they expect the company to restore full pay for employees. Respondents are CFOs and other financial leaders from PE-backed companies, ranging from small (less than $50m in recurring revenues) to very large (more than $10b in recurring revenues).


Survey responses suggest that PE-backed companies are optimistic about a recovery from the COVID-19 downturn, and CFOs expect fewer cuts to spending going forward. For many, it seems, the recovery is already here.


First part of the survey (spending cuts)

We began by asking PE executives whether they plan to increase, reduce or keep spending the same over the next 90 days (in comparison to the 2020 calendar year). Nearly all respondents plan to either increase spending (45%) or keep it the same (46%). Only 9% of respondents plan to make further cuts to spending – a clear sign that the PE sector is in recovery.



We then asked respondents to tell us when salaries and wages would be restored to pre-COVID levels. In our 2020 survey, CFOs were fairly bullish on this topic – with nearly all expecting salaries and wages to be restored by Q1 2021. This has largely been borne out in the second survey results, with 87% of respondents reporting that salaries and wages have already been restored. However, this is slightly behind projections from 2020.



Taken together, these findings suggest that while the COVID-19 downturn affected PE-owned companies, there is significantly less concern about the economy not recovering quickly. The focus has shifted to growth, or stability at the very least.


Second part of the survey (allocation)

The second set of questions focus on how CFOs plan to allocate time and funds as the sector emerges from the COVID-19 downturn.


Compared to the previous 90 days, 43% of CFOs surveyed plan to spend significantly less time focused on reducing cost, with only 10% of that group planning to spend much less time on the task.
Among the tasks to which CFOs plan to allocate their time, introducing new a product/service or expanding into new markets stands out, with 56% of CFOs planning to spend more time on this. Only 3% plan to spend less time on this task when compared to the previous 90 days. Furthermore, 40% plan to spend more time expanding by acquisition.



In terms of fund allocation, 62% plan on spending more on hiring and 42% more on salaries and wages. Most CFOs plan to keep spending on capital expenditure and discretionary spending the same, with 34% and 25% expecting to increase spending in these areas, respectively.



The survey offers a snapshot of private equity in the United States. Respondents hail from companies with less than $25m in annual recurring revenues (15%), $25-99m in annual recurring revenues (42%), $100-999m in annual recurring revenues (35%) and more than $1b in annual recurring revenues (8%).


Among respondents, 78% come from businesses organized around a business-to-business (B2B) transaction model, 16% from businesses organized around a business-to-consumer (B2C) transaction model and 6% from companies that do not fit neatly into either category.




Our first survey of PE CFOs, conducted in May 2020, showed how deeply the COVID-19 downturn impacted PE-owned companies and their spending priorities, and that defensive cuts had already been made. CFO respondents predicted that the sector would recover by early 2021. The results from our second survey, conducted in April 2021, bear out those predictions.


With more than 100 million Americans fully vaccinated, and many more on the road, economists are widely predicting a post-pandemic boom. These results suggest that the PE sector is ahead of the game, and as such, better positioned to take advantage of recovery spending.




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