Using Technology as a Competitive Advantage: Private Equity

No matter the industry -- legal, accounting, academic or private equity, each one harnesses technology in unique ways, all toward capturing a competitive advantage in their sector that will translate into an edge.

In this series, “Using Technology as a Competitive Advantage” we examine the how each vertical sector is positioning technology differently in 2022 and how emerging technologies, such as AI (Artificial Intelligence), will play an increasing, yet different, role in the spectrum of business arenas.


The World of Private Equity

Private Equity generally refers to investment funds, typically in the form of limited partnerships, that offer a form of financing/investing where capital is invested away from public markets. While Private Equity firms can vary in terms of their focus, they share a reputation for a conservative approach that relies on relationships and the ability of deal teams to drive returns.

Things are quietly changing in 2022 for Private Equity, but the seeds of this change were planted many years ago. With access to voluminous amounts of data that can support or sink investment decisions, many firms are taking note of the significant impact technology can have on the private markets. Moreover, the opportunity for technology to play an increasing role in operations is something investors and investment firms are paying attention to.

Today, 56% of private equity firms use (or expect to use) next-generation data and analysis tools; 50% now use -- or expect to use in the coming year – some form of artificial intelligence.

What’s Driving this Adoption of New Technology?

No one can overlook the impact of the pandemic as an across-the-board technology adoption driver, but there are other drivers, occurring in tandem, that started this trend, generating greater interest in technology solutions:

Technology will define the next era of Private Equity transformation.

46% of Private Equity investors believe access to meaningful data is their biggest challenge during an acquisition. 44% say a lack of reliable information is the most significant factor that can cause a Private Equity firm to reduce its offer or walk away from a deal. It’s incumbent upon Private Equity firms to raise their game when it comes to data sourcing, analysis and interpretation. Data-driven firms will not only remain at the forefront of innovation but will likely be the only private equity firms to weather the storm of digitization.


What Can Private Equity Firms Do Now to Stay Ahead of the Technology Curve?

There are many ways Private Equity firms might adopt technology in more meaningful ways. It starts with having a clear idea of what the challenges are, on both the data and operational side. Once this is understood, a plan can emerge to use technology to make incremental gains for the overall business.

While no two Private Equity firms are exactly alike, the common thread running through all is the need to partner with an IT team that is trusted, reliable, proactive and understands the unique operational aspect of a Private Equity firm. Without this understanding, embracing innovative technologies will present challenge after challenge. The hallmark of a suitable IT team is empirical experience with a Private Equity firm, executing day-to-day tasks as well as the strategic initiatives.

It’s easy for Private Equity firms, especially those with a successful record of accomplishment, to adopt a “it’s good enough” mentality when it comes to technology budget and investment. It’s the highest performing firms, however, who challenge the status quo and continually keep abreast of changes in technology, such as Artificial Intelligence (AI), seeking ways to take advantage of them and exploit them for a competitive edge. The message is, remain open to change, consider the emerging technology trends and keep an eye on what your competition is adopting. When it comes to Artificial Intelligence (AI) many are looking at AI technology to expedite the deal-making process allowing deal teams to analyze large data sets much faster.

The digital transformation is turning more information into digital form at accelerating speed, creating an entirely new landscape of technology enablers. This is due, in large part, to the incredible success of cloud-based technology infrastructure. By increasing the level of available computing power, Private Equity firms are exploring the benefits of “Big Data” and new ways to apply automation to those data sets.

Adopting the cloud allows systems in both the front and back-office to integrate and allow the firm move a step closer to a simpler, more efficient and robust enterprise-wide IT environment. Data is ingested, managed and automated with computing power that can flex as needed, thus improving operational efficiency.

Historically, Private Equity firms have not regarded cybersecurity as a high priority, especially for deals. The focus was [deal] performance and the reputational risk. In 2022, however, the increasing threat of cyber-attacks, directly or indirectly, especially with war raging again in Europe, is leading a greater number of Private Equity firms to reconsider the priority of cybersecurity in deals and portfolio management.

As Private Equity executives realize these factors, they are taking more robust steps to understand information security and cyber defense risk across their portfolios. The traditional standard assessment approach is no longer suitable, and a new risk playbook tailored for Private Equity firms is needed.

Technology is re-shaping the way Private Equity firms run their business and operations. Working with a trusted IT partner, staying open to innovative technology solutions, investing in technology tools and making cybersecurity a priority are all the ways Private Equity firms can gain a competitive edge in 2022 and beyond.


Roark Tech Services is a dedicated IT Managed Service Provider serving Private Equity firms since 1998. We are experts in the field and are uniquely qualified to help small businesses stay safe & competitive. Always consult with us first.

If you don’t have an IT Partner that you can trust to give you the right support and advice, we’d love to help. Contact us.

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