How Data Analytics Transforms Private Equity Deal Selection and Exits

Uh, and so I was doing some reading, uh, recently on private equity and the use of data within private equity, and I came up with some stats, uh, that I was quite surprised about, and I just wanted to discuss on today's show. And so have them written down here just, um, so I make sure I get them right. But, um, seventy-nine percent of partners reported significantly improved deal selection after implementing predictive analytics. So, you know, these days there is an awful lot going on in terms of how you extract data, how you get access to the data that you want to be able to do with it, uh, that you wanna be able to process, but then also what you do with it. And having, uh, an analytics platform be able to, uh, offer up guidance and support when it comes to decision making, of course, these days is becoming more and more prevalent.

It doesn't have to be LLMs. There's a bunch of different ways to be able to do it. But that predictive nature of figuring out, um, you know, how to structure a deal, how to implement the deal, uh, as you go through, um, the process, if you can leverage the predictive nature of analytics and the, uh, the data that underpins it, then you know, you're clearly gonna come out with a better sol- um, solution, [clears throat] a better outcome, I would hope. Um, I'm surprised it's only seventy-nine percent, to be honest. But, um, that seems like a reasonably significant number, to say the least.

Then we have a look at, uh, companies, portfolio companies that have yet to properly, uh, invest in, uh, digital transformation. And so, unsurprisingly to a lot of us out there, having worked in data for, you know, our entire careers, sixty-five percent of companies that transition from spreadsheets and old style ways of doing things, uh, experience above benchmark growth for the sector that they work in, um, you know, the industry that they work in. Um [clears throat] and it's unsurprising. You know, at the end of the day, you can make better business decisions. You can make better, um...

You know, you're not relying on gut feel at the end of the day. You're making decisions that have been based in fact from the data to be able to then, uh, navigate your way through the market and get ahead of competitors. And so the nice thing about that, obviously, is that investment then pays off because sixty-five percent of companies see above benchmark growth in their industry, in their sector. And I think that's, you know, that's a cool, uh, underpinning of the importance of using data efficiently and effectively and making that investment because obviously you wanna be able to get to a point where the outcome from your perspective is better than all the competitors in your, uh, in your area because that way your exit will become, you know, much more valuable. Which then takes me on to the portfolio exit point of view.

And so seventy-two percent of private equity execs lack the data and the KPIs to support the exit. [clears throat] And again, I felt like this was an interesting, uh, statistic because data is everywhere. There's, you know, metrics and KPIs for almost everything today, but it's how you then leverage it to make decisions that is important. And if you're trying to navigate an exit and you're trying to get the most, you know, bang for your buck when it comes to a portfolio company exit, then making sure that you have the right metrics and KPIs, of course, is crucial, absolutely crucial to what you wanna be able to do. And so the fact that such a large number of PE execs do not have access to that information, I find, you know, to be honest, quite staggering.

Uh, but this is where, you know, data transformation, digital transformation in the AI era is gonna play a massive role because it's not all about the AI. The AI is a nice wrapper that you stick on top. But all these companies, the data has always been there, but it's not been as accessible, it's not been as transparent, and you've never been able to move as quickly as you can today. And so, so many companies that I have spoken to or worked with over the course of the last couple of years are moving rapidly towards, you know, digital transformation that allows for the organization to make much better and more educated data-centric decisions. And that's, you know, crucial to every organization pretty much that's in existence today.

And the portfolio companies are no exception to that. And by allowing them to make better decisions means a better exit, but it also means that you can time that exit more appropriately because at the end of the day, everybody then has access to the data, the market data, the business data. You can make those better exit decisions. So I hope that that makes sense. I hope those stats provided some insight as to, you know, where the market is these days.

Um, yeah, and if you need to know more, if you're interested in how this affects private equity, feel free to reach out, and I will happily have a conversation with you all. Anyway, thank you very much for tuning in. I know I'm outside and it's a bit noisy, but thank you very much for tuning in once again. Uh, my name is Tom. This has been The AI Briefing.

I will see you all tomorrow. Bye for now. Why hire when you can partner? Concept Cloud's leading engineers build your startup's prototype without the overhead. Launch faster.

Conceptcloud. com.