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Private Equity Funds as Drivers of Digitalisation

Industry Insights

Many German companies are struggling with the digitalisation process. Private equity (PE) companies now always conduct digital due diligence tests as part of their due diligence processes in order to evaluate the associated potential for value creation. How does that actually happen in practice?

The last ten years have shown that digitalisation is one of the primary value drivers for the corporate equity story. For that reason, continuing the development and strengthening of the digital assets of their portfolio companies is very attractive to private equity (PE) companies in the sense of a positive equity story. We see that these kinds of investors have a powerful mood of optimism.

Why private equity funds are becoming important for digitalising medium-sized businesses

Because of their broad, cross-industry experience, PEs have been quicker than many other companies to understand the opportunities of digital markets and the risks introduced by this process if investments are not made consistently and quickly in programmes to increase digital value. It’s important to always map out the digital aspect in M&A transactions in a very clear manner – this should be a core component of commercial due diligences. Many private equity fund companies have developed their own digital teams for this, which then implement programmes for increasing the value of portfolios together with digital consulting firms. In this dynamic environment, investors are digitalising their own DNA and giving this to their portfolio companies. By doing so, private euqity firms are becoming pioneers who are lending decisive motivation to traditional medium-sized businesses. The limiting factors are not so much money as much as they are time and opportunities to find and employ the right digital talents in the organisation thanks to the investors’ readiness to invest in digitalisation.

How to start digital transformation within companies

A good start into digitalisation is the analysis of the digital maturity, with focus on the company, the market and the competitors. On that basis, a programme for increasing digital value can be developed, including the business case and milestones, followed immediately by the implementation of the programme – because the digital competition has no mercy on losses of time.

At OMMAX, the implementation process concentrates on the company’s various departments and is based on 30 proven concepts for digitalisation (such as digitalising the value creation, the products, the marketing channels, the data utilisation and the analysis processes as well as the development of a digital organisation). Thanks to our database with more than 100 million data points from transactions and implementation consulting, we can make decisions based on the data and precisely determine the maturity and the potential for the development of a company. It is crucial not to think short-term when doing this, but rather across investment cycles and durable lifetimes.

Strategy and implementation from a single source

Since OMMAX consultants do not just advise customers (private equity firms as well as B2B and B2C companies) strategically, but also provide seamless service during the implementation phase, we can quickly react to new trends and adjust strategies. Our approach is to avoid unreliable plans and to develop serious, sustainable solutions that achieve initial success within three to six months. Doing this creates trust and shared success, which is important for implementing projects that are more complex. Several customers have been trusting us for three generations of owners, which has allowed all OMMAX teams to have a significant share of the companys’ success stories in the fields of transaction consulting, digital strategy and digital execution.

B2B e-commerce on the rise

The e-commerce market and B2B service business models are very dynamic at this time. We currently see annual growth rates in these industries of 40 to 60 per cent. Industry representatives are among those who have benefited from the Corona crisis.

This also causes strong movements in the transaction market since many private equity companies would now like to sell their assets to earn a profit. E-commerce is no longer restricted to the B2C market – the B2B e-commerce market is also gaining increasing significance. Many companies can no longer advertise their products at trade shows, and self-service portals, digital marketing platforms and approaching customers digitally, including appointment scheduling and simple digital communications, have become vital.

OMMAX services for Private equity companies

Learn more about digital due diligence and our services for investors.

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