CFOs of private companies are enthusiastic about but wary of SPACs



Diving Brief:

  • Diversity, equity and inclusion (DE&I) and environmental, social and governance (ESG) standards are priorities for the new quarter, Grant Thornton said. latest CFO surveyreleased Tuesday, watch.

  • “Consumers and employees are demanding greater action and more transparency on DE&I and ESG matters,” said Enzo Santilli, head of Grant Thornton’s transformation consulting business line. “It’s vital for businesses to invest in these areas, and that means learning how to best measure their return on investment.”

  • The pandemic has also prompted CFOs to reprioritize their technology investments: 53% said they prioritize long-term investments in core technology infrastructure over technology that meets needs. immediate business. “Striking a balance between solving immediate needs and longer-term technology investment […] is a critical challenge,” Santilli said.

Overview of the dive:

More than three-quarters of respondents prioritize DE&I and ESG within their organization, and more than half plan to increase investment in the areas in the future.

To track their investments in the field, most CFOs intend to use employee engagement tools, monitor recruiting practices, and introduce targeted software solutions.

Jane Thier/CFO Dive, data from Grant Thorton

Although challenging, the pandemic has resulted in a handful of small victories, the 250 finance executives said. More than 60% reported improved flexible and remote work environments, and more than 40% reported improved collaboration.

Similarly, 40% noted improved business processes and strategic focus, despite working largely remotely.

Going forward, many CFOs plan to minimize their real estate expenses. Nearly one in three plan to reduce their company’s real estate and facilities expenses over the next year, and almost another third to reduce them permanently.

Just under half of CFOs expect to reduce their travel expenses over the next year; 41% plan to reduce it permanently.

“A year ago, CFOs were scrambling to survive, but sometimes a crisis can accelerate positive change,” said Chris Schenkenberg, national managing partner of regional tax business lines at Grant Thornton. “It is clear that, especially among private companies, finance leaders are not content to go back to the past. They asked what’s possible, not just what’s wrong, and found new ways to move their organizations forward.

CFOs remain open to policy changes under the new administration; nearly half (44%) said the Biden administration’s environmental regulatory plans would positively impact their businesses.

Two in five support the Biden administration’s labor regulations and 39% believe that financial regulations would have a positive impact on their businesses.

The only issue on which CFOs were unenthusiastic: taxes. Just under 40% said the Biden administration’s tax plans will negatively impact their businesses. Among companies with over $1 billion in revenue, 55% expected tax changes to have a negative impact; only 29% of companies with revenues between $101 million and $500 million felt the same way.

Nearly 70% of respondents said the lack of policy coherence in Washington will “at least somewhat” negatively affect their ability to plan future investments. More than 4 in 5 CFOs in manufacturing, technology and telecommunications companies expressed this concern.

“Stability and predictability are important,” Schenkenberg said. “Most companies are open to reasonable regulation if they can count on a firm hand at the helm.”

Focus PSPC

CFOs are also watching the trend of going public by merging with a publicly traded blank check company using the SPAC process; 84% said SPACs increased their interest in an IPO. They were about evenly split on whether a SPAC from a traditional IPO would be their preference.

“SPACs offer an attractive option for companies considering going public,” said Sean Denham, global services industry leader for Grant Thornton. “But CFOs have reasonable concerns about possible regulatory attention, valuations and the possibility of a bubble.”

More than 70% of CFOs believe SPACs improve access to capital for startups, and 67% said they can speed up an IPO. But 69% expect more regulation of SPACs from the Securities and Exchange Commission this year, and 55% believe that SPACs overvalue new public companies.

“2021 could be a transformative year for CFOs, a year where the finance function moves from crisis management to growth,” Denham said. “Whether it’s investing in technology, changing society, or seeking to take a company public, the old ways will no longer work.”

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