Private equity firms require a sustained digital transformation
According to industry studies digitalization has been named as the most important trend influencing private equity houses. The influence of digital transformation comes as no surprise, as digitalization is changing the way all industries do business. From healthcare to manufacturing to software and retail, customer expectations are changing, requiring business models to adapt accordingly — the pace at which technology is advancing demands a fast response. COVID-19 is even accelerating the pace in which companies must redefine the digital value creation potentials and explore new, unbureaucratic ways to stay ahead of competition.
To maintain a competitive edge and create sustainable value for their investors, the private equity sector will need to take advantage of digital innovations both internally and throughout the selection and management of portfolio companies.
The top challenges private equities encounter
- Investors, who do not include digitalization as part of the due diligence process, run a risk of missed opportunities and value traps. To have a full understanding of a company's prospects and position, investors need to understand where the company and its competitors stand in the digitalization process and understand the value creation potentials
- A research has shown that while 71% of private equity firms surveyed are aware of the availability of using new digital channels, only 29% have done so1
- The digital transformation is going to threaten traditional business models and requires portfolio companies to be well prepared for digital disruptions and adapt to the market accordingly
- Due to the fast pace at which technology is advancing, private equity firms need to view the digital transformation as a new opportunity for value creation that would allow portfolio companies to reach their fullest potential
Various opportunites to help in creating digital value
Digital due diligence
Traditional commercial and financial due diligence is expanding to include a digital component to the process
Better evaluation
By putting the focus on digital, private equity firms can have a highly effective way to deliver efficiency improvements, revenue, and earnings growth, and ensure a high pricing multiple at exit
Identifying the potential early
To prepare for the digitalization of portfolio companies, private equity firms need to start thinking about possible digital transformation processes prior to the due diligence stage
Boost portfolio companies
The digitalization of portfolio companies would allow them to experience faster support, to track customer satisfaction, and to facilitate omnichannel sales due to personalized marketing
Building further value
Portfolio companies could provide new products and services, achieve competitive cost performance, and fine-tune their commercial strategies, with provided digital transformation opportunities
Our expertise
As an experienced partner in digital transaction advisory, we identify, analyze, and evaluate digital targets and their potential, as well as performance improvement opportunities. By combining our inimitable capabilities in digital strategy, operations, technology, and digital marketing and leveraging our data and cross-functional team, we steer the complexity of transactions. Based on well-researched and integrated views and data insights, our analyses cover all aspects of the transaction, on both the buyer and seller side during a vendor due diligence (VDD). The thorough evaluation allows us to provide highly customized, commercial, and digital transaction support to both private equity and corporate investment clients as well as their portfolio companies.
Our international team has assisted >1500 realized projects in digital strategy, digital operational excellence, data science, and transaction advisory services. With a team that speaks over 20 languages, and a 50% female-male ratio, we ensure both effective communication and representation throughout the advisory process.
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