Data and analytics drive value in Private Equity
Discover the power of data and analytics in driving value creation in the Private Equity (PE) sector with this insightful article, "Delivering Value: How Leading Private Equity Firms Are Using Data and Analytics to Drive Value".
This article offers an in-depth understanding of how many PE leaders and portfolio company managers are leveraging data and analytics to tangibly increase the financial value of their assets and accurately quantify the potential value of targets during the diligence process.
In the past decade, the PE value equation was straightforward due to low interest rates and cheap capital. However, the current economic climate has changed the equation. With interest rates at their highest level in over a decade and a slowdown in M&A markets, valuations have tumbled, creating significant challenges for PE managers.
The article explores how many PE firms are now seeking alternative ways to enhance the value of their portfolio companies and quantify the value of their targets. It delves into the shift towards a more direct focus on operational excellence initiatives aimed at unlocking stronger and more sustainable EBITDA improvement and working capital value creation opportunities.
Within the article it highlights the role of technology and analytics in the diligence process. It discusses how these tools can provide managers with an outside-in view of their target, improving the robustness of their due diligence. On the sell-side, transactional-level detail combined with sophisticated analytics could enhance the equity story by surfacing quantified and prioritized value creation opportunities that support improved valuations.
Article summary
Private Equity (PE) leaders and portfolio company managers are increasingly using data and analytics to increase the financial value of their assets and quantify the potential value of targets.
The traditional PE value equation has changed due to factors such as high interest rates, slowed M&A markets, and lower valuations, leading to a shift in focus towards operational excellence initiatives for value creation.
PE firms are facing challenges in driving operational efficiencies due to a lack of data, inconsistent data, and the need for deep functional capabilities and sector expertise to deliver on expected value.
Technology and analytics can provide managers with detailed insights into their targets, improving the robustness of their due diligence and enhancing the equity story by surfacing quantified and prioritized value creation opportunities.
How KPMG can help
The article features real-world examples of how KPMG firms have developed a data-driven approach to value creation, combining proprietary data, insights, and operational experience to help buy-side and sell-side players identify, quantify, and execute significant value creation opportunities.
A different view on value
KPMG recently helped a PE owner merge an IT portfolio company with a direct competitor. We deployed geospatial analysis to assess the two companies’ asset locations, historic tick volume data, customer SLAs, field engineer and inventory locations, drive time data and other operational data to identify opportunities to optimize their combined network. Our work led to a 20 percent cost reduction in core service delivery for the new entity.
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Data and analytics drive value in Private equity
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