How Data Analytics Will Transform Private Equity

The private equity industry is just beginning to tap into the power of data to evaluate potential investment targets and grow portfolio companies. There are several underlying technology trends at play to enable the rise of big data, including enormous increases in computing power, cloud computing architecture and inexpensive storage.

Leveraging the right data analytics platform can bring immense benefits to the private market investor.  With the right platform, private equity firms have an unprecedented opportunity to unlock new sources of value and revenue in their portfolio companies.

We’ve put together three reasons why data analytics will transform private equity:

  • Due Diligence

After identifying potential targets, investment professionals can partner with companies that have the data analytics tools required to create multidimensional views of those opportunities. These tools can complement conventional analytics processes and allow investors to dig deeper into companies’ performance and potential.

Imagine if your firm could improve collection of data on prospective companies. This not only opens up the number of companies you can thoroughly vet before deciding whether or not to invest, it also opens up the value of going through due diligence with your firm over others.

  • Deal Sourcing

By using data analytics tools, investment professionals can gain access to far more information about a much larger universe of companies than they could possibly do through traditional processes. They can also evaluate a tremendous amount of unstructured data (such as social media posts, quality ratings, and customer reviews) to identify potential targets.

Data analytics tools can provide richer and more comprehensive information about a potential opportunity than conventional processes can produce.  Professionals who use these tools will be able to see various aspects of a potential investment faster and in more detail than their competitors.

  • Portfolio Monitoring

Data collected from portfolio companies, is often gathered through Excel and PDF reports, aggregated by an analyst, and eventually stored in a document storage program.  Implementing a data analytics platform that can easily aggregate this data not only saves time, but opens up endless possibilities for identifying growth potential in a portfolio.  An automated data collection platform can not only collect a stream of data that displays the financial performance of underlying companies, but also collect data that informs what drove those outcomes.

Make your data work for you

Rapid developments in digital tools, advanced analytics, automation, among others, embolden the traditional private equity playbook.  To find out how your firm can benefit, talk to Treehouse Technology Group about how we can  improve data analytics for your firm giving you a clear look into your fund’s operations, capturing data in your pipeline, and automating your portfolio monitoring process.

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