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Private Equity Insights Q3 2024

Q3 2024

A dynamic business environment: Inflation, operational costs, geopolitical instability, uncertainty concerning upcoming elections, disruptive technologies and regulatory changes are among the many areas likely to have an impact on private equity firms (PE). Some developments are encouraging. Interest rate reductions, for instance, should help reduce capital costs and facilitate exits. Other areas, such as the uncertainty around upcoming elections and geopolitical tensions, make it more difficult to assess the best way forward for PE firms.

Tools and techniques for progress: As PE firms look to capitalize on emerging opportunities and overcome obstacles to gain a competitive advantage, they are utilizing tools and techniques that help ensure funds are allocated efficiently, risks are managed effectively and the potential for value creation is maximized. Examples include:

  • PE firms are increasingly using AI for purposes such as deal sourcing, due diligence, operational improvements and predictive analytics.
  • Cost optimization and financial planning & analysis (FP&A) enable PE firms to make more informed decisions regarding their current assets and when considering future investments.

In this issue of Private Equity Insights, we discuss our latest Global Finance Trends Survey results. CFOs and finance leaders around the world rated their top finance priorities. Our intent is for PE firms to use this intelligence to design and deploy new practices, tools and innovative approaches in their own finance organization. We next take a look at financial planning & analysis (FP&A) responsibilities and follow with a VISION by Protiviti interview on AI, automation and the future of financial regulation. We conclude with guidance on how to prepare to function as a public company BEFORE the initial public offering (IPO).

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A look at the top priorities for CFOs and finance leaders in the coming year — among them, security and privacy of data, financial and strategic planning and analysis, leadership, and enhanced data analytics — reveals a tale of transformation for CFOs whose responsibilities continue to widen.

Expanding roles: Our latest Global Finance Trends Survey results, based on responses from more than 950 finance leaders worldwide, show how top priorities can be drivers for growth and transformation. To excel, CFOs and finance leaders must extend their expertise, and their influence, throughout the organization.

By the numbers: Notable findings from our research include the following:

  • 57% of organizations that are employing generative AI are doing so as part of financial forecasting activities (overall, 34% of organizations are using generative AI in their finance function).
  • 21% of organizations have achieved valuable cost and efficiency benefits and improved their finance projects through the use of AI and machine learning. They are understandably interested in addressing immediate concerns, such as reducing operating costs and improving efficiency.
  • 61% of finance leaders and professionals rate the security and privacy of data as a high priority for the finance organization in the coming year.

Go deeper: In this report, we explore the top finance priorities as rated by finance leaders from around the world and provide detailed perspectives on how CFOs are focusing on cybersecurity and accountability, AI’s long-term value and other complex issues that go beyond traditional finance and accounting. To address these opportunities and challenges, we also offer key action items for CFOs and finance leaders.

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A double-duty mandate on the CFO has resulted from the extension of financial planning & analysis (FP&A) responsibilities to leaders throughout the enterprise, placing additional demands on finance leaders.

High stakes: FP&A expansion stems from an increasing need to drive value, optimize costs and enhance agility enterprise-wide amid a dynamic business climate being influenced by many factors, including continuing inflationary trends, geopolitical conflicts, trade wars, supply disruptions and workforce challenges.

Bottom line: CFOs should help their business partners, as well as their own finance function, nurture their FP&A capabilities to increase the relevance and accuracy of the FP&A outputs with effective governance and controls. This focus plays to the finance group’s perineurial mission.

Go deeper

In this VISION by Protiviti Interview, we welcome Jo Ann Barefoot, CEO & Co-founder, Alliance for Innovative Regulation (or AIR), a nonprofit organization working globally to promote a more fair, inclusive and resilient financial system by helping adapt financial regulation for the digital age. Barefoot, who hosts the global podcast Barefoot Innovation and is a Senior Fellow Emerita at the Harvard Kennedy School Center for Business & Government, discusses AIR, digitization, AI and the future of regtech.

In brief: 
“If we look at the financial sector, it is changing as much as anything else around us in terms of technology, digitization, tokenization, all the trends that we’re living with, and it really matters. It’s an area where if it doesn’t work well, people get hurt.”

“We can encourage development of AI assistants for the financial consumer who can help her pay her bills, do her budget, evaluate financial products, see through offers that may have hidden fees or terms that would be adverse to her, manage to meet her own preferences and priorities as she’s saving and trying to build wealth.”

“I think these systems are going to remove the need to do so much regulatory work with lagging indicators at risk, which is what we have mostly today, and the whole industry is going to be able to get ahead of problems.”

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The big picture: The U.S. initial public offering (IPO) market may be regaining its footing. Current market conditions mean companies considering an IPO have ample time for infrastructure buildout – arguably the most important phase of the IPO journey.

Signs of increased IPO activity: Despite continued economic headwinds and geopolitical pressures following the emergence from the global pandemic, there are indications that the U.S. IPO market is steadily trending upward. For instance, the number of IPOs priced to date this year has increased more than 40% compared to this time last year.

How to proceed: Companies considering an IPO should begin holistic preparation that positions them to become a public company and to function successfully as one. This includes a readiness assessment, a public-company-readiness roadmap, and ensuring their team includes the right internal stakeholders and external advisers.

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TAKE OUR GLOBAL BOARD GOVERNANCE SURVEY

Protiviti, Broadridge, and Board Prospects are pleased to launch our second annual Global Board Governance Survey designed to gain the perspective of board members, CEOs and other C-level executives on the topic of disruption. Your participation will help us better understand and contrast the perspectives of active directors and C-suite leaders on this important issue of our times.

Take the survey today

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