Historically in private equity, you rarely heard the words “data” and “transparency” next to each other because it was never a top priority.
Investors sought out potential investment opportunities by going out and networking with their peers. Then, they would share these companies with their junior investors for further investigation. And that’s how the deal would start – with most of the focus placed on execution.
But all of this changed with the advent of deal focused technology.
Digital tools, like private market intelligence platforms and industry-specific CRMs, came to the market and exponentially increased the level of data transparency on both external assets and in-house communications. These tools now allow investment professionals to easily access relevant data and information on the private market, regardless of their network and seniority level.
This heightened level of data transparency gives investors an advantage in this highly competitive deal landscape as it transforms their deal workflows and daily operations. But how is it that the simple concept of data transparency can play such an important role in becoming a top performing PE?
Promotes active deal origination
When you have a high degree of data transparency, you’re able to develop a complete view of your total addressable asset pool (TAAP) – the number of companies in your sweet spot criteria. This allows you to better understand these companies and track them as potential investment opportunities.
Once you have visibility on your TAAP, you no longer have to rely as heavily on your professional network to scout for deals, which means that you can spend more time sourcing deals from a larger universe of companies.
Spending more time on active origination will allow you to identify deals earlier on and help you avoid missing out on relevant deals altogether.
Creates efficiency in deal execution
During the deal execution process, a higher level of data transparency allows you to prepare internal convictions ahead of the due diligence process, so you can enter with a more clearly defined vision and work efficiently throughout the entire process.
In addition to this, having visibility on relevant assets helps you identify key due diligence areas ahead of the auction process.
Strengthens the development of deal angles
Because data transparency creates efficiency in all areas of the deal lifecycle, you’re left with more time to create winning deal angles – the factor that truly differentiates you from your peers.
These time-savings also allow you to spend more time with the management team where you can implement actions that increase your likelihood of winning the deal.
Increases employee retention rate
In the past, junior level investors were tasked with collecting and analyzing data and information on private companies so partners could qualify or disqualify them as potential investment opportunities. But there’s a reason why this type of work was offloaded onto juniors – it can be extremely tedious.
Now, with the help of digital tools, investors of all seniority levels have open access to relevant data and information, reducing the time required to prepare and receive company profiles. Instead, everyone can spend their time on more value-add tasks, like active origination and developing winning deal angles.
With less time spent on tedious tasks, everyone can benefit from a more challenging workload. But for junior investors specifically, this advanced workload can help shape them into well-rounded professionals. It can also reduce their likelihood to churn to other firms as they are more satisfied with their career progression.
How to achieve data transparency in private equity
Data transparency is quickly becoming a business critical component of becoming a top performing PE – something necessary in today’s highly competitive deal landscape. And the best way to achieve data transparency is through the adoption and continued use of industry specific technology, like private market intelligence platforms and deal focused CRMs.
To learn more about these digital tools and the guidelines for implementing them in your own firm, read our latest eGuide, The Impact of Data Transparency on the Finance Industry. We go into detail on how data transparency impacts deal workflows and gives you your competitive edge.