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Event Recap  |  03/30/2020  |  Accordion

COVID 19: Practical Advice for PE-Backed CFOs (Part I)

Insights from the Accordion (Virtual) Roundtable

On Thursday, March 19th, Accordion hosted a virtual roundtable for CFOs to share real-time COVID-19 situations, debate potential scenarios, and exchange thoughts on short-term solutions. Within 3 days of sending the invite, we had over 60 CFOs in attendance. Here are a few of their key insights and learnings:


1) Cash flow: Cash flow, cash flow, cash flow. The 13 week iteration has become the gold standard for front-line fiscal pandemic assessment. But, PE-backed CFOs are looking beyond the gold. They’re zeroing in on cash, more acutely and more urgently.

“We obviously do a 13 week cash flow. We’ve accelerated that to predict how it evolves every week. We also do a daily cash exercise that we share with our exec team, but not our sponsor.”

2) Broader Liquidity Measures: CFOs are looking at the broader liquidity picture. They’re seeking a better understanding of fixed vs. variable cost drivers in order to make more proactive decisions (even absent an accurate revenue forecast). And, they’re looking at AR and AP – changing business as usual practices on the former:

“We’re looking closely at our receivables. We have a lot of pay forwards. And now we’re looking at doing more of a prepaid for our clients so that we’re not laying cash out as with our normal business model. We’re having frank conversations with clients and having more of a risk-sharing partnership.”

And, making Darwinian-like decisions on the latter:

“We’re looking at the other side. Prioritizing payment by critical vendor, and creating a cascading chain from there.”

3) Scenario Planning: CFOs are heavily steeped in scenario planning, mapping out the bad case, worst case, and doomsday-like possibilities:

“We took three different scenarios: The mild case, which is a 10% reduction in margins; the downside case which is 25%; and then the severe case of 50%, to see what that would do both to our cash flow and covenants. Then, we put together a tiered response of actions in each of these scenarios.”


There are two revolver questions on the mind of every PE-back CFO. What do we draw? And, when do we draw it?

There’s no CFO consensus here, except around its criticality and their general uncertainty:

“Of course the first action we took was to draw down on our revolver – not quite 100%, but just about.”


“We did not fully draw down on our revolver. We did like a 3 million extra draw, but it depends on your business.”


“I haven’t pulled down on the revolver yet. I think that’s the big question for us – when’s the right time. We don’t need it from an operating perspective – we have plenty of capacity. But, as the markets tighten, we want to be ahead of that.”

When there’s an immediate liquidity issue, the answers to the when and what questions are clear: now and all. But absent a liquidity issue, CFOs are drawing down in order to add some additional cushion. And, they’re acting now out of concern that market instability will close the window on their availability to do so down the line, when they might actually need it.

There’s also the question about how to message the draw with lenders – and what message those lenders might take from it.

“Our draw was based on our assessment of immediate liquidity and things that could happen. For example, what if our largest supplier who pays monthly and regularly begins to defer. So, we added a little more liquidity, but we didn’t want the bank to think we are trying to take out a run on the credit facilities. So we did not pull draw.”

If there’s no consensus on what to pull and when, there is about debt service provider disclosure. When pulling for preventative purposes, CFOs believe in the criticality of communicating to that end.

“We walked them through the potential impacts we saw in the business, making sure they understood that there were really just mitigating the risk or taking out insurance versus, you know, an actual cash need.”


Much like the pandemic itself, the prevailing wisdom here is ‘we don’t know’. But, there’s CFO optimism that government intervention will ensure a continued and steady stream of lending capital.

“I don’t see a scenario where the banks are left holding all the credit decisions because then that will go counter to the relief that that the government is trying to inject.”

That optimism, however, is tempered by the reality of the uncertainty around the virus and its long-term economic implications.

“It’s too early to tell. Extending a revolver over – which is anything but business as usual – seems to be the smart, go-to move. “

There are, of course, other factors to weigh into the uncertainly. Size matters. CFOs backed by large-cap firms will likely have enough leverage with debt providers such that they can draw down now, and still have the ability to go back to the well for additional liquidity. Companies backed by mid-market firms don’t share that leverage and must calculate their now vs later decisions differently (and accordingly).


There’s a desire to go back to the 2008-2009 precedent. But, there’s also the recognition that because this is uniquely unprecedented – because we don’t know how long the pandemic will last and therefore lack clarity about the duration of its financial implications – it’s an entirely different calculus this time around.

So what’s the new calculus? What are CFOS doing about employees and headcount, now?

First, there’s an across-the-board hiring freeze on all non-essential hires. Beyond that, there’s the obvious talk about layoffs. That’s a more empathetic discussion then it has been through other crises. CFOs are concerned about the length of the runway before layoffs are required, understanding the acute personal ramifications to their employees in this environment.

As a result, they’re thinking through creative solutions – ways that they can lower employee cash roll, without cannibalizing their prospects for recovery, later.

“How do we furlough people, knowing that they’re valuable assets that we can’t afford at the moment – also recognizing that this situation may impact the marketplace and some of our competitors which will effectively allow us to grow faster on the other side?”

Of course there’s the across-the-board salary reductions, but there’s also more unique approaches, including pushing bonuses to year-end and ‘shifting’ employees:

“Like one week on, one week off, three weeks on, so that we save a quarter of the payroll, but still maintain people on benefits, and then also have them available so that we don’t have to retrain and start from scratch once the turnaround begins. It’s more palatable to employees and it leaves us in a better recovery position.”

Some CFOs of pre-COVID growth companies with enough liquidity on the books to maintain payroll see this as an opportunity of sorts:

“We think we’re in an amazing position to grow quickly when this is over, so we are using the down time to try to train up.”

Whatever their strategy is as it relates to headcount, CFOs are unanimous that transparent employee communication will be key.

“Nobody has the crystal ball to know what’s going to happen. But over-communicating rather than under-communicating is absolutely the right answer.”


CFOs are hyper focused on collections. They’re weaving the operations group into AR, they’re monitoring collections daily, and they’re proactively reaching out to stakeholders in advance of scheduled payments:

“If you’re looking at invoices that you know are about to go due, proactively reach out to the customer and ask if there is anything we need to do to get paid. Be a squeaky wheel.”


The unexpected business disruption almost always brings with it an unexpected counter-cycle opportunity. For CFOs, the question is how to get an organization struggling to conduct business as usual to take advantage of those additional/incremental revenue streams.

“The key to jumping on these opportunities is number one: make sure you have the liquidity. Number two: make sure that, as a CFO, you’re driving the leadership team to think about these opportunities rather than only focusing on maintaining the balls in the air.”