AI readiness drives tech investment surge
New investment imperatives in a changing tech landscape
As with other industries, AI readiness has emerged as a critical focal point for private equity. In an interview published by Private Equity International Magazine, KPMG technology, media, and telecommunications leaders Anuj Bahal, Patrick Carpenter, and Greg Sward observe that private equity sponsors are increasingly prioritizing tech companies that are prepared to harness the potential of artificial intelligence. This shift is driving interest in the tech sector, even amidst broader economic uncertainties.
In fact, artificial intelligence readiness is a key part of investment theses — and it is increasingly important for attracting capital and is now pervasive throughout tech. There is still over a trillion dollars of dry powder in U.S. private equity and a lot of the caution around deployment has related to questions about AI readiness and the impact of that, with the tech sector positioned better than most to provide answers.
Other key takeaways:
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Shift to profitable growth: The market is witnessing a significant shift from focusing solely on growth to emphasizing profitable growth, requiring PE funds to invest deeply in value creation efforts.
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Operational readiness for exits: With anticipated increased IPO activity, companies must be operationally ready, emphasizing the need for early specificity, periodic IPO-readiness assessments, and addressing identified gaps. With extended hold periods, there is an intensified focus on value creation, requiring investment in robust operational teams to support portfolio companies.
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Regulatory environment: A mixed regulatory landscape exists, with potential benefits from deregulation but challenges from global trade tensions, particularly between the U.S. and China.
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Tech sector’s dominance: The tech sector's complexity and scalability offer extensive opportunities for value creation, making it attractive to private equity investors. Technology's impact across industries, including fintech and healthtech, creates significant deal opportunities.
Technology is literally impacting every end market and that creates tremendous deal opportunities
Anuj Bahal
Principal, U.S. National Technology, Media & Telecommunications (TMT) Deal Advisory and Strategy Leader
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