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Impact of Data Analytics on Private Equity Firms

Published on Apr 02, 2020

Data analytics creating value for private equity firms

With the help of data analytics, private equity firms are disrupting their industry with business models that are driven by modern technology. PE companies such as Quicken Loans and Rocket Loans have successfully implemented the initiation of loans electronically and automated the personal loan and mortgage approval process.

Similarly, a car dealership firm, Carvana, has shifted the entire car purchasing process online where customers handle the entire end-to-end process. Companies are taking advantage of the low-cost digitally operational business models that provide competitive edge. Most of the private equity firms believe that the true potential of data analytics, machine learning and big data can’t be realized by small scale PE companies. But as a matter of fact, advanced data analytics can be utilized by companies of all sizes. From start-ups to big players, machine learning and data analytics has been continuously empowering organizations to maintain their competitive edge.

Harnessing the power of data in private equity

Data analytics is proving to be a game changer for PE-owned firms as critical business decisions are resulting in to a significant and long-term value creation. The inevitable challenge that the PE firms project – that to accurately predict a company’s growth portfolio, is being revolutionized by data analytics. Corporate finance consulting services by leading investment research firms along with advanced analytics has been able to provide a granular perspective to the private equity firms when they move forward to put a company on the market.

Private equity firms are incorporating various standard analyses and statistical machine learning models to accurately understand the data. By analysing the data at a micro level, firms can figure out if the business is doing well or not as well as explore new opportunities to improve the situation. Data analytics has helped PE firms save a considerable amount of time as they are able to come to a conclusion of “whether this company will generate returns or not?” quickly.

Conclusion

Impact of Data Analytics on Private Equity firms Nowadays, value creation is paramount for private equity firms. An explosion of the digital technologies has led to the creation of numerous opportunities for the PE firms. As we acknowledge that data is the new oil, it is advisable for the private equity firms to back those management teams who are willing to embrace analytics. Firms that are stuck in inertia and resist any change will have to integrate data analytics and business in the future or otherwise face obsolescence.

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