Private equity sponsors & CFOs clash over exit readiness levels
A recent survey by Accordion has identified significant misalignment between private equity sponsors and portfolio company Chief Financial Officers regarding the issue of exit readiness, with potential implications for company valuations during sales.
The report, titled Exit Readiness in Private Equity, revealed that 72% of private equity sponsors believe CFOs are falling short on preparing for company exits. The gap between sponsor expectations and CFO actions is leading to financial repercussions, with up to three turns of valuation at stake according to respondents.
Accordion's research highlighted that nearly all sponsors, at 97%, expect portfolio company CFOs to be "always exit ready." However, only 20% of CFOs state they operate with this approach, with 61% admitting they shift into preparing for a sale only when a potential transaction window emerges. This compressed preparation, typically occurring only 3-6 months before an exit for more than half of CFOs, was pinpointed by sponsors as a key contributor to diminished valuation, often by one to three turns of the exit multiple.
Nick Leopard, Chief Executive Officer at Accordion, explained the issue by stating:
"Exit readiness isn't a checklist to complete in the eleventh hour. It's a continuous discipline. Sponsors are training for a marathon, but too many CFOs are preparing for a sprint. That gap puts real value at risk-especially now, as market conditions begin to shift. With the Fed's recent rate cut, a resurgence in dry powder, and a potential multi-year exit cycle ahead, those who treat readiness as a last-minute exercise risk missing the moment. The firms that win will be those who've embedded exit readiness into their operating model long before the banker's call."
The study involved 200 senior executives from private equity sponsors and 200 CFOs from companies backed by private equity, each with annual revenues surpassing USD $50 million. It identified several key areas where sponsors and CFOs diverge in their understanding and execution of exit readiness.
Timing and approach
There is a distinct difference in the expected timeline for exit preparation. Sponsors overwhelmingly (81%) wish to see preparations begin 12-24 months prior to a sale. In contrast, 54% of CFOs typically initiate exit planning just 3-6 months before, a period which 71% of sponsors believe leads to reduced deal multiples. Additionally, 39% attribute rushed exits to subsequent post-sale financial adjustments.
Definition and criteria
Another disconnect exists in the definition of what constitutes being exit ready. Most sponsors take a holistic view, with 86% highlighting active value creation levers, 79% prioritising integrated systems, and 73% seeking credible equity narratives. CFOs, meanwhile, tend to focus on specific, tactical outputs: 64% emphasise diligence packs, 58% audit-ready financials, and just 32% identify value creation as part of their readiness framework.
Performance concerns
The perceived shortfall in exit preparedness is attributed by sponsors to several factors: poor quality data (67%), limited experience with prior exits (59%), insufficiently resourced teams (46%), and a lack of scenario planning or equity storytelling (48%). Correspondingly, only 9% of sponsors rate their CFOs as exceeding expectations in these areas.
Barriers faced by CFOs
CFOs acknowledge several obstacles to achieving continual readiness. Almost half (49%) cite capacity constraints, while 44% point to fragmented systems. Additionally, 36% report unclear expectations from sponsors as a challenge, and 31% note that lack of experience with exits hampers their preparation. Each of these hurdles, according to sponsors, is linked to lost value at exit.
AI and data readiness
The adoption of artificial intelligence is increasingly seen as a key differentiator. Eighty-five percent of buyers now factor in AI-enabled financial processes when valuing targets, and sponsors suggest that CFOs integrating AI into planning, forecasting, and reporting are twice as likely to deliver improved exit outcomes and higher valuations.
There is also a focus on maximising periods of lower M&A activity. Seventy-one percent of sponsors monitor whether CFOs use this downtime to enhance exit readiness, with proactive companies 58% more likely to benefit from shorter due diligence periods and higher valuations when the market becomes more active.
Longer holding periods, which now average 6.7 years, are raising sponsor expectations further, with 82% stating that this increases the need for CFO-led transformation. Nevertheless, only 38% of CFOs report adapting their approach in line with this trend.
Defining best practice
The survey identifies several characteristics of high-performing CFOs in private equity portfolio companies. These individuals typically begin preparations at least 18 months ahead of a planned sale, are four times more likely to have direct exit experience, and two and a half times more proactive in aligning their readiness strategy with sponsor definitions. For these CFOs, exit readiness is embedded as a continuous element of their operating model, relying on persistent value creation, robust datasets, and AI-driven decision-making.
Pamela Stern, Managing Director and Head of Commercial Excellence at Accordion, commented:
"This survey makes clear that being 'exit ready' can no longer be episodic. CFOs need a playbook for what we call 'always-on readiness', a framework that embeds exit discipline into day-to-day operations, aligns sponsors and finance teams around shared definitions of value creation, and ensures no opportunity for optimization is left on the table. That's the next evolution of the sponsor-CFO relationship."
