Private equity company, make your life easier with Data & Analytics tools

Target screening seems to be regarded by private equity buyout investors as both time-consuming and a nuisance. However, the introduction of new D&A tools has made screening processes more efficient and less time-consuming, which, in turn, allows investors to allocate more time to creating value for their portfolio companies.

private equity

Who knows where the time goes?

According to a study commissioned by Tekes and FCVA (Finnish Venture Capital Association), private equity buyout investors spend a significant portion of their time selecting and developing acquisition targets. In fact, it is estimated that, on average, over 50% of the lifespan of a fund is taken up by these activities.

Furthermore, almost one quarter of a fund’s lifespan typically goes into target selection alone. Hence, it is essential that this time be used productively and that suitable targets be chosen. To achieve this, it would clearly be beneficial to make the screening process leaner and less time-consuming, as this would allow more time for developing the targets, which yields the real value for private equity players.

Private equity investors live and die according to their respective track records. It is thus vital for them to make profitable and suitable investment decisions and to be able to develop their portfolio companies so as to maximize their value. The better the target selection is at the start, the easier it will be to establish value creation practices later on.

What gives a headache to private equity investors?

According to the above-mentioned study, the issues that create the worst headaches for private equity investors are the finding of suitable investment targets, and issues related to the quality and quantity of the potential targets.

In addition, approximately two-thirds of private equity investors examine at least 30 companies per investment.

Therefore it is imperative, as a time-management tool, to make the screening process as efficient as possible, and to gather enough data on potential investment targets in order to make coherent decisions on which targets should be contacted and on how the acquisition process should be started.

How D&A tools can replace painkillers

The screening of potential investment targets can be made easier by using sophisticated D&A tools that help cut through the noise and support private equity investors in recognizing those targets with the highest potential for growth in value.

Establishing industry benchmarks is essential for any screening process, as it allows the performance of potential targets to be matched against industry best practices. But all too often, benchmarking doesn’t provide the details and context required for a truly well-informed investment decision.

Therefore KPMG has developed a unique and rapid D&A tool named “Benchmarking Plus”. The tool goes beyond the usual publicly sourced data used in screening and taps into KPMG’s robust proprietary database, along with third-party databases, thus giving the private equity investor access to beneficial information e.g. financial, operational and segment specific KPI’s gathered from our engagements.

With the help of Benchmarking Plus and KPMG, private equity players can save time and make the screening process more cost-efficient.

Jan-Patrick Haikkola has worked for the KPMG Global Strategy Group since April 2017, and has recently worked on several projects related to private equity. He has advisory experience in growth and deal strategies and M&A. In his free time, Jan-Patrick enjoys watching football (even though watching Arsenal at the moment is not the most enjoyable pastime!), and jogging.