As Silverline looks forward to the second half of 2020, we wish to share insights about the trends we are seeing in our Private Equity portfolio and how we are helping our clients use technology to optimize operations, source new deals, and deliver better experiences for their investors and assets.
Our goal is to help clients realize value and competitive advantage through strategic technology programs so that together we can drive more effective fundraising and deal processes, support emerging business lines through technical innovation, and roll up our sleeves to help bolster the economic recovery ahead.
Where the world of Private Equity currently stands
In May 2020, the partners at Andreessen Horowitz released their FinTech newsletter which argued that “businesses of all kinds are experiencing two years’ worth of digitization compressed into months.” Private capital is no exception to this rule. In fact, over the last decade of consulting with Private Equity and Venture Capital firms about long-term technology strategy, our experience at Silverline has been that the focus on digital transformation is at an all-time high.
As we reflect on our work partnering with Private Equity firms, one major observation is that the fastest-growing global players have built strong technology management capabilities in-house while leveraging expert service providers to provide industry insights and expertise in emerging technical domains.
The highest performing and most diversified firms now possess a deep capability to imagine and execute new ideas for technology, and this creates significant leverage for dealmakers and investors alike. The practice these firms have gotten over the last decade designing, building, and innovating new products sets them up for success and sets them apart from their competitors under current market conditions.
In fact, one of the topics we broached during our Summer Roundtable Series in June of 2019 with KKR, Evercore, General Atlantic, and Stonebriar focused on the perennial question of when to invest time and resources into learning and adapting new technologies versus buying off-the-shelf point solutions. This is the very argument for fintech partnerships that Andreessen Horowitz makes in their May 2020 newsletter, stating:
“The age-old question of “build vs. buy” may be a thing of the past. In the current climate, it’s becoming increasingly apparent that in order to adapt quickly, institutions will be compelled to prioritize fintech partnerships. At present, most banks are reacting to pressure to be virtual and digital—simultaneously shifting more than 90 percent of their employees to work virtually while operating on legacy, on-prem core banking systems that have not yet migrated into the cloud… Compounding the pressure on banks, fintech companies were already challenging existing business models and acquiring new users well before the pandemic hit. Now a focus on automation, machine learning, and analytics will be more important than ever. This data-driven, customer-centric shift will define the future of financial services.”
From automation and AI, to machine learning and advanced analytics — the landscape of Private Equity is quickly becoming one of reinvention and innovation for the private markets at large.
As the future and culture of finance shifts, so must the ways in which firms do business. Private Equity firms in our portfolio are looking at their innovation roadmaps through these major lenses:
- Productivity: Beyond managing the growing pipeline of potential investments, firms are increasingly interested in smart, AI-powered tools that deliver an edge in day-to-day operations.
- Integration Planning: Each new portfolio acquisition is an opportunity to rethink business models, retool business processes for efficiency and data capitalization, and leverage technology to realize greater post-deal synergy. Earlier technical planning is critical to long-term success.
- Analytics Vision & Data Strategy: As firms monitor the global market of opportunities and manage their portfolio of assets, a unified data strategy is critical to decision-making. A good data strategy is one that is always evolving — and we work with the most sophisticated firms to align their data roadmap to their analytics vision and uncover new, valuable sets of data.
How can these viewpoints shape the way your organization functions? Get the full report to see the bigger picture.