Why Should Private Equity Firms Put Their Money Into Technology?


Modern technology is fundamentally changing the way businesses operate today, and private equity firms, like any other business, must adapt to be competitive in the services they can provide to their partners.

Every business and industry is undergoing a technical and digital revolution. Private equity isn’t any different. Private equity firms now have unprecedented access to massive amounts of data that can help — or hurt — their investing decisions. Tomorrow’s private equity leaders will be those who use data and technology to inform all of their actions.

We’ve compiled a list of compelling and crucial reasons private equity firms should invest in technology. Take a look at why the equity business needs to adopt and implement digital transformation initiatives right now.

  • Get a Head Start on the Competition

It’s not uncommon for private equity businesses to use out-of-date technology in their operations. Endless, manually-input spreadsheet databases on various systems can give the impression that they aren’t ready to fundraise or handle any procedure with a moderate level of sophistication. Private equity businesses are no exception. The majority of enterprises believe that technology investment is critical to guaranteeing their future economic prospects.

Modern solutions get designed to assist businesses in giving an experience to their investors, including mobile-friendly applications and robust analytics, reporting, and communication capabilities. These technological solutions make it easy to share essential information with investors and develop more productive collaborations.

  • Old Working Processes Put Data Integrity at Risk

The usage of old software and an over-reliance on manual processes endangers the data integrity of the companies in which PE firms invest. Joseph Stone Capital suggests that Modern cloud database solutions enable PE firms to construct a central hub of all information that is safe and accessible to all stakeholders that require it.

  • Lack of Streamlining Workflow

Manual processes typically result in two outcomes: dissatisfied employees and costly workflows. Many working processes can get streamlined today with automation that gives all relevant information to the right stakeholder inside an automated framework that eliminates the need for needless human input until necessary.

As a result, data flows swiftly and gets channeled to exactly where it needs to go, resulting in a considerably more productive working environment. It also has the added benefit of freeing up employee time so they may focus on jobs that require human interaction.

  • Visibility issues

When communicating information with a small group, multiple routes and instances of communication are usually required. These channels of communication are ineffective, opaque, and insecure. Joseph Stone Capital says that Private equity firms invest in platforms that enable associates to obtain data on their own time. These gateways are maintained on a secure website and provide access in the view that authentication can get assured, records can be stored electronically, and who has seen or approved what can get monitored via a central management package.

  • Siloed Systems Slow Down Progress

Siloed systems—databases and applications that get separated from one another—are frequent in organizations, sometimes as a build-up of software solutions over time. An ERP, such as Microsoft Dynamics, is frequently used in modern businesses. These ERPs consolidate all applications into a single platform, preventing silos and allowing decision-makers to create a system in which data from various apps gets fed into a central hub in real-time. Financial accounting, investor communications, portfolio management, and analytics reporting are common examples.

In recent years, the private equity industry has seen a significant upheaval. Technology will surely change the next era of private equity. Access to user data is the top obstacle for 46 percent of private equity investors throughout an acquisition. Furthermore, 44% believe that a lack of reliable information is the most important reason that will prompt a private equity firm to cut or abandon an acquisition.

Private equity firms, like many other industries, face increasing pressure to enhance their operations and adopt the technology. For firms that are still using older, legacy-style systems and apps, it may be worth evaluating whether a modern cloud solution may give the tools needed to ensure that partners are happier as of this technology. Investing in new technology solutions can help improve this outlook by providing more access to data, more transparency about information about partners, and a sensible approach to communicating relevant information to them.