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Trend Report: Private Equity Outlook and the Productivity Imperative

By Jill Harrison 08.25.20 Big data analytics, financial charts, business team working on computer
This is part two in a series that addresses the technology trends the Private Equity industry is facing. Curious to read more? Here’s part one from the head of our Capital Markets practice.

If your technology strategies aren’t producing rapid results, your firm isn’t performing at its best — let alone outperforming competitors to take advantage of the rapidly-changing economic conditions to deploy capital.

As of June 2020, Preqin reports that the dry powder private equity funds have to deploy sits at an all-time high of $1.45 trillion globally. According to the Wall Street Journal, “of all the dry powder in the buyout industry, about 85% is earmarked for funds raised from 2017 to 2019, according to analysis by the investment and consulting firm Cambridge Associates.” 

This translates into substantial available capital for new investments, but what does this mean for tech? 

High-powered, high-speed solutions

The record-high dry powder correlates to the need for record-breaking productivity for firms as they look to deploy capital into smart investments. In the last several months as the SBA has released over $750B to fund the Paycheck Protection Program, traditional lenders have struggled to keep up with the transactional load and have increasingly turned to high-tech solutions to keep operations afloat. And although PE firms were excluded from the PPP legislation, we can take cues and learn lessons from this scenario, which has led to acute technology challenges. The productivity needs for private equity dealmaking professionals, alternative lenders, and those who service private investors require similar high-powered solutions. 

First, technology powers a collaborative dealmaking and productive investment management process for Private Equity. The apps and IP we have built in partnership with clients help teams manage their pipeline and allocate in-flight deals to funds, geographies, and strategies as they evaluate their investments and run the diligence process. The analytics and reporting tools these firms use help management visualize data about investments to make the best-informed decisions and close the loop back to fund performance. These firms are well-positioned under these market conditions. 

Insights in an instant

But for firms that lack centralized productivity and collaboration tools, this is a major pain point. How does management gain insight into the best assets and the best add-ons across hundreds of potential investments? How do deal teams prioritize work, manage the diligence process, and evaluate firm cultures so they invest their capital in the most effective way? 

Private Equity firms looking to build or reboot their technology strategy at this moment in history are laser-focused on productivity, process improvement, and operations — especially as it pertains to the deal pipeline and investment process. Firms with buy-out funds and distressed asset strategies are especially keen to operationalize their deal flow, committee reviews, and diligence process as the volume of opportunities accelerates into the second half of 2020. 

Beyond managing the growing volume of potential investments, firms are increasingly interested in smart, AI-powered tools that bring about a productive edge in day-to-day operations. We have been rolling out next-gen tools like Salesforce Inbox to help deal professionals get the early jump on deals through smart meeting scheduling, read receipts that measure client and investor engagement, and more. And firms with direct lending operations are extending their productivity in major ways through client-facing portals to securely manage requests and establish direct lines of communication to clients in these highly-volatile times.

Is your firm looking to boost productivity with AI-powered insights that keep you ahead of the curve? Get the full report to learn more about growing 2020 Private Equity trends.

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