Data and Technology to be the Next Frontier in the Private Equity Firms

Big Data

Big Data

Big Data and Technological innovations have become the prized possession for global businesses.

The novel COVID 19 pandemic has scourged the global economy and halted the financial progress made over the last few years. As businesses are grappling with restoring their services, most of them are now turning towards technological innovations to be a guiding light through the pandemic.

Undoubtedly, data and Technology has become the prized possession for global businesses. Even before the pandemic hit the global economy and markets, data and Technology were not unknown. They were in the nascent stage of adoption. Companies, countries and big tech organizations were already making lucrative portfolios by leveraging both data and Technology to their clients and customers. And small businesses were waiting for a motivation to adopt the technological innovations.

Now the scenario is altered. As the global supply chain demand has changed and customers have become more cautious about their choices, businesses, both small and medium, are now compelled to play with both data and technology to improve their operations.

Global Private Equity firms are writing new chapters for the adoption of technological innovations and investing in Technology. It is observed that companies with digital business models will thrive as compared to those who are at the hindsight of digital transformation.

With a second wave of the novel SARS-CoV -2 virus and the increased market volatility due to the US elections 2020, both Private equity firms and venture capital firms are persevering maximum benefits through digital transformation. Undoubtedly, it will take years for the global economy to revert back to normal, and that’s why private equity firms are looking for multiple options to gain profits.

Technology will not be integrated as an entity in the industry in the coming years but will be a differentiator on how the business models work. Experts observe that companies with limited assets but with a Technology-driven business model will have a much better financial climate.

Jason Thomas, Washington Based Managing Director and head of global research at the Carlyle Group LP, said “Companies not making big changes toward digitized, technology-enabled business models are losing market share, and their private equity owners will have tough exits in their futures.”

The private equity firms are rendered with tough choices to make, but this will propel them to invest in Technology, which has become the guarding force of businesses in this pandemic.

 

Reforming expectations

With the Technology-based business models, the expectations and the aims of businesses have also reformed. They are now focusing on drawing maximum advantage through data analytics. With the plethora of data generated every day, businesses are pondering to draw meaningful insight into customer behavior.

John Park, Head of KKR &Co. LP, a private equity firm in the USA observes that the companies are now figuring out how to use the abundant data and variant technology. He said, “Not every company that sits at the crossroads of lots of data is necessarily worth more. Companies that sit on a preponderance of rich data should have the ability to create products around that data. They should be able to leverage that data to grow faster.”

Currently, it becomes necessary to evaluate business performance through Technology. Through data analytics, private equity firms can engage in drawing out the comparisons between the revenues generated in different investments.

 

Leveraging Technology to gain Insights

Through Technology, private equity firms can draw meaningful insights regarding the governance of their businesses. For example, with the help of speech and text analytics, a roadmap can be created to evaluate the firm’s performance. This can be extended to evaluate employee performance, as well.

The technology-based business models also ensure in understanding the patterns in customer preferences through customer data platform. This will help equity firms invest in those startups or businesses that can make maximum revenue.

David Lewin, a Montreal-based senior partner at private equity firm Novacap, said that data collection helps the executives analyze the risk and opportunities in the business investment.

 

Outlook

The pre-pandemic era concluded on a positive note for the private equity firms, but the COVID 19 has staggered the cash flow and revenue. According to a BDO survey, an assurance, tax, and financial advisory firm, some 77.5% of private equity and venture capital respondents stated that the assets would be sold or taken public at prices 10% to 20% lower than they would have in the pre-COVID era.

Experts have a positive outlook for private equity firms for regaining their financial stature with the technologies. As businesses plan to move ahead with digital transformation, private equity and venture capital firms are becoming compelled to invest in Technology.