The path to value creation has become narrow for private equity portfolio companies in the face of stagnant management playbooks, a tough labor market, and a lack of access to real-time data, according to PwC’s Next in Private Equity Survey.
Here, two figures are instructive. Just over half of portfolio company respondents used e-mailed attachments to collect data, while 36 percent respond to requests via e-mail alone. The result is static, scattered data sets that defy real-time analysis. The answer? Automate and digitize processes to create additional synergies, PwC says.
Digital transformation has gotten top-billing from private equity executives, but the ongoing talent war might make automation more important than ever. Unwilling or unable to pony up huge salaries to retain deal team members who can ensure a smooth process, PE firms can actually benefit from using data platforms that react to new inputs as they come in.
Moreover, the due diligence process on prospective targets is sluggish. The consultancy points to bidder reliance on information sourced from the seller and third-party sources that leaves alternative data sources unused. Bringing the diligence process into the current era means turning to data processing platforms that can analyze targets quickly.
The era of seller-friendly terms might well be ending, but until buyers are able to exercise parity in negotiations, having access to fresh, responsive data might well be the nearest thing to closing the gap.