The rapid growth and change in the private sector must be matched by the changes in data and analytics that the sector provides. Private equity fund managers need high-quality technology solutions that refine visible data and simplify workflow throughout the entire business cycle.
Considering opportunities and facing challenges
Private companies are in a unique position to use resources. In addition to significant capital resources and financial sophistication, their business model assumes the ability to make profitable decisions based on certain facts. The need to manage, collect and protect PE data, including portfolio company data, is significant. The value of monitoring, researching and even producing this data is enormous, both for the main partner and for the portfolio companies.
The sector also faces particular challenges when it comes to effective data management. Grant Thornton Global recently gathered operating partners from leading private equity firms to share their thoughts on how best to assess their investors' needs, consider opportunities and address data challenges in the private equity space.
Software development, data analysis and digitization
Private equity is not very advanced in the processes of software adoption, data analytics or digital transformation. If anything, it lags behind organizations such as consumer banking or retail, which have implemented extensive digital transformations to maintain commercial relevance. While some private equity firms have adopted portfolio management software systems and hired data analytics experts, many still rely on simpler programs and much more needs to be done to gain a commercial edge in a highly competitive environment.
Objectives vary widely, from obtaining basic EBITDA and revenue information in formats native to portfolio companies, to building a comprehensive real-time data system. Promising halfway points include a set of meaningful comparative data on key benchmarks across the portfolio, historical revenue and EBITDA data, dashboards to track key metrics, paginated reports that executives can study on their own schedule, rich data on potential shares costs or services such as procurement and ad hoc reports on key issues.
New priorities for business improvement
Recent developments and proposed regulations have made it increasingly important to monitor non-financial metrics such as ESG implementation, cybersecurity status or climate risk.
Private equity firms are on the cusp of embracing insights that can transform and improve their business—and the business of their portfolio companies—but more changes need to be adopted. Cultures must change, new leaders must emerge and priorities must be defined. With quality analysis, digitization and under expert guidance, every company will improve its business. Contact Grant Thornton experts for help!
Data source: Grant Thornton Global