In today’s fast-paced M&A environment, deal making is increasingly a challenging task. Competition is only increasing as private equity (PE) firms, strategies, and other investors aggressively vie for the most attractive targets. By the middle of 2018, PE firms globally had a record of USD1.2 trillion in committed yet undeployed capital (“dry powder”), with many noting plans to raise additional funds.
While PE firms are focused on targeting the right potential investment opportunities, they are also more focused than ever on finding new ways to maximize growth of existing assets. With the increasing speed, sophistication, and unorthodox visionaries in the market, the margin for error continues to tighten. Smarter decision making and more efficient asset growth methods are requirements in today’s market.
To enhance competitiveness and deal outcomes, PE firms need an edge—an information advantage. Using data science methods, highly trained data scientists can integrate more data from a wider variety of sources and use sophisticated models to identify insights and opportunities that standard data analysis simply cannot offer—and they can do it at deal speed.
Data science can help PE investors to have the confidence to validate and “defend” the investment thesis and cash flow sustainability. More importantly, other firms are using such information in an “offensive” mode that uncovers hidden value levers for in a potential target or existing portfolio asset. In this market, data science tools and techniques can be the difference.
The firms that are taking advantage of the opportunities presented by data science are already realizing game changing benefits. They are justifying high-winning bid prices in competitive contexts—knowing they can reduce the multiple through enhanced growth opportunities and performance improvement within their portfolio. Those that do not embrace data science quickly will be at an information disadvantage and risk competitiveness and, potentially, returns over the long term. The question is: How does a PE firm move from the status quo to a data-driven approach that will deliver real results throughout the M&A lifecycle?
PE funds that understand how: