Co-Investments in Private Equity: A Growing Strategy in the UK

Co-investment — where a private equity firm invests in a deal alongside its limited partners or other investors, rather than solely through a commingled fund — has become a familiar feature of UK mid-market deals. Most coverage of it focuses on the investor’s view: why LPs want it, how GPs structure it, what it does to fees. This guide takes a different and, for a growing business, more practical angle: what a co-invested cap table means for the finance leader you need to appoint. Because in our experience the single most underestimated consequence of accepting co-investment alongside a lead PE round is what it does to the CFO role — the scope, the reporting, the governance, and the calibre of person required to handle it.

What co-investment does to the CFO role

Having placed CFOs and finance directors into a number of UK businesses with co-investment structures on the cap table — from mid-market PE-backed businesses with strategic LP co-investors through to family-office-backed growth companies investing alongside a lead fund — the pattern is consistent enough to state plainly: co-investment expands the CFO mandate, and businesses routinely under-scope and under-price the role as a result. A few dynamics dominate what we see. Family offices are co-investing directly alongside traditional PE funds far more than they used to, appearing in a meaningful share of the mid-market deals where we place finance leadership. Institutional LPs are taking up co-investment as fees on commingled funds compress. And corporate venture arms are co-investing more actively in technology and life sciences. Each of these brings a co-investor to the table who wants something from the finance function.

The implication is one that often surprises founders. As I put it to them: when a business has co-investors alongside the lead PE fund, the CFO appointment becomes materially more complex, because the CFO is now reporting not only to the lead PE board but to co-investors who want direct visibility into the asset they have backed. We see CFO mandates expand to include co-investor-specific reporting cycles, board attendance by co-investor representatives, and explicit valuation-transparency requirements that simply would not arise in a single-PE structure. A founder weighing whether to accept co-investment alongside their lead round should plan for that governance overhead as part of the decision — it is real, it is ongoing, and it lands squarely on the finance function.

A representative recent placement shows how this plays out. A UK technology business came to us to recruit a CFO following a growth investment that combined a lead PE fund with two separate LP co-investments. The mandate as drafted required regular reporting to all three investors with separate board attendance for each, fund-level valuation reporting to support the co-investors’ own reporting cycles, and an agreed valuation methodology across all three parties. The CFO we placed had prior experience of exactly that multi-investor reporting complexity, and the package reflected a clear premium over a comparable single-PE-backed CFO role — with explicit acknowledgement in the offer that the added scope justified it. The specific figures vary deal to deal; the direction does not.

Three observations from current practice are worth carrying into any co-investment decision. First, co-investment cap-table complexity creates genuine CFO scope expansion that should be priced into the appointment rather than discovered afterwards — a premium over a comparable single-investor role is normal, not a candidate over-reaching. Second, family-office direct co-investment is becoming materially more common in the UK mid-market and brings different governance preferences from institutional LP co-investment — the finance leader needs to be comfortable with both. Third, the CFO appointment process for co-invested businesses simply takes longer, because more parties want a say in the hire; build that into the timetable rather than being caught out by it.

Co-investment, briefly: what it is and why it has grown

For the founder or finance leader coming to this fresh, the mechanics are worth understanding because they explain the governance that follows. In a co-investment, the private equity firm invests directly in a specific deal alongside its limited partners or other investors, rather than only through its main fund. The co-investors put capital directly into the asset, usually on more favourable fee terms than a commingled fund would carry, in exchange for taking a direct, deal-specific position.

The reasons it has grown in the UK are straightforward. Co-investment gives investors more direct involvement in and control over specific deals; it lowers the fee burden relative to fund investing; it aligns the interests of the lead fund and the co-investors, who now share directly in one asset’s success; and it lets investors diversify into specific opportunities they find attractive. For the lead PE firm, offering co-investment can deepen relationships with valued LPs and let it pursue larger deals than its fund alone would support. None of this is controversial — it is why co-investment has moved from occasional to routine, a shift the BVCA (now UK Private Capital) has tracked across the UK market. What matters for the business on the receiving end is that every one of those co-investors, having put capital directly into the asset, now has a direct interest in how that asset is run and reported.

The governance reality of a co-invested cap table

The heart of the matter, and the reason this is a finance-leadership question rather than purely an investor one, is that multiple direct investors mean multiple reporting relationships. In a single-PE structure the CFO reports to one board on one cadence in one format. Add co-investors and that multiplies: each may want its own reporting cycle, its own board visibility, and its own comfort on how the asset is valued. The finance function becomes the point where all those demands converge.

• Multiple reporting lines. Co-investors frequently want direct reporting into the asset, on their own timetable and in their own format, on top of the lead fund’s board reporting — a real expansion of the finance team’s workload.
• Valuation transparency. Co-investors carrying the asset in their own portfolios need an agreed, defensible valuation methodology they can rely on for their own reporting — something the CFO must be able to produce and stand behind.
• Wider board dynamics. Co-investor representatives attending the board change its composition and its conversations; the CFO is presenting to a more varied and demanding audience than a single-PE board.
• Alignment and dispute risk. Where co-investors’ interests diverge from the lead fund’s — on timing, on an exit, on further funding — the finance function often sits in the middle of reconciling them.

None of this is a reason to refuse co-investment — the capital and the relationships it brings are frequently well worth it. It is a reason to go in with the finance function properly resourced and the CFO role properly scoped, rather than treating the appointment as identical to a single-investor one. The businesses that handle co-investment well are the ones that recognised, up front, that the cap table they were building would ask more of their finance leadership.

What to look for in a CFO for a co-invested business

It follows that the finance leader a co-invested business needs is not quite the same profile as a single-PE-backed one. The differentiating experience is having operated inside a multi-investor structure before — someone who has run parallel reporting cycles, negotiated a valuation methodology acceptable to several parties, and presented to a board with more than one investor voice in the room. Alongside that, the role rewards the softer capabilities that multi-party governance demands: the diplomacy to manage several investor relationships without playing them against each other, the clarity to keep reporting consistent across audiences, and the confidence to stand behind a valuation under scrutiny from more than one direction. These are learnable but not common, which is why the search for a co-invested-business CFO is usually narrower — and why scoping and pricing the role realistically from the outset matters so much. ICAEW’s corporate finance resources set out the reporting and governance standards these roles operate within.

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