3 Common Private Equity Pain Points

Private equity has evolved significantly over the past several years – moving from an era of “bootstrap” deals to one defined by complex, fast-paced transactions. This shift has boosted the role of technology in helping assess asset value and deliver operational improvements – both of which impact the bottom line.   

But how do you know if your technology investments are working to help you accomplish your business goals? Can you expect your current tech ecosystem to scale with your business in the future? These are not uncommon questions – and if you’re asking them, you’re not alone. Let’s dive deeper into three common challenges private equity firms experience related to technology.  

No. 1: Lack of visibility into portfolio performance. 

If you can’t adequately assess how your investments are performing, it’s impossible to make good decisions about how to manage them and facilitate their growth. In many cases, lack of performance visibility can be attributed to data that (1) is missing or siloed, (2) is inaccurate, or that (3) is inaccessible to key personnel in a timely way.  

Consolidating systems and integrating data into a single source of truth solves issues around data siloes and missing data. Establishing data governance guidelines and procedures should correct inaccuracies in your data. And a user-friendly enterprise data portal allows qualified individuals fast access to data they need to measure portfolio performance.  

These fixes will improve data integrity, streamline investor reporting, and allow you to make data-driven decisions. 

No. 2: Your technology environment is too complex.

Here’s two scenarios that are becoming more familiar as technology takes center stage in the private equity sector. One, your technology ecosystem is becoming so big and complex that you can no longer manage it in-house. Two, you’re not sure if the software and services in which you’ve invested are delivering an adequate return on that investment.  

In both scenarios, the core question is: how much technology do you need to accomplish what’s spelled out in your business plan? By assessing your current technology landscape, a consulting partner can help you determine what a right-sized technology investment should be. If you are overpaying for your current technology set-up (and, spoiler alert, many firms are), right-sizing will save you money and streamline your technology environment so that it’s easier for your IT team to manage.  

No. 3: You’re having difficulty defining and executing a strategy.

Continuing the above thread – there’s hardly anything more important for private equity firms than ensuring alignment between their technology investments and their business plan.  

If you are hoping to expand into new channels of growth and trying to determine what technology investments are needed to accomplish that, then you must have a forward-looking technology roadmap in place.  

A technology roadmap documents your current ecosystem and provides the framework for future growth based on your business goals. Such a roadmap improves revenue growth, ensures that you’re getting appropriate ROI on your technology investment, and gives you a leg up on positioning your investments for growth and disposition.  

Saxony Partners’ Private Equity Solutions 

Saxony Partners helps private equity clients gain operational improvements through digital initiatives and transformations. 

Our work with private equity companies spans the full lifecycle, from acquisition to exit. We help our clients realize the full value associated with digital transformation and data strategy. And speaking of data – we help our clients do more with their data in order to achieve superior value for both their firm and their portfolio companies. This leads to higher value exits and better returns for your limited partners. 

If your private equity firm is hoping to improve portfolio performance, pursue technology due diligence, and gain insights from a strategic partner, our team of experts can help. Reach out to us on LinkedIn or fill out our contact form