While private-equity firms have long used humans and connections to find investments, they’re increasingly turning to more high-tech means.
Ian Charles, an executive at the $27 billion private-equity firm Landmark Partners, said his team already worked with “the small handful of groups that exist today” to better understand how data could be used in deals.
“Ten years from now, all the big private-equity firms will have teams of data scientists that are deployed on buy-side due diligence, sell-side due diligence, and operational improvements,” Charles said Thursday night at Bloomberg’s Private Capital conference.
“If a major buyout player has a big-data approach to understanding revenue streams of a company that they’re in deep due diligence on, they may actually understand revenue trends on that company over the next 12 months better than management.”
He said private-equity firms could gain an edge by having the best information about a company they’re bidding for, rather than just competing on price.
“Even if they lose on price, sometimes management will be so impressed with that data and how it can help them manage their business better, they’ll find a way to bring them into the deal in some sort of security that does justify the risk,” Charles said.
He predicted both investors and investment managers would use data teams.
The private-equity firm EQT has said it uses software to help source deals, and Blackstone is starting to build out a data-analytics team.
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