The private equity industry is undergoing fundamental changes. Despite the industry being more reluctant than most to adopt new technologies, it is now increasingly obvious that AI data analysis has incredible potential for investors both pre- and post-deal to generate significant value, and PE firms are now looking for the best ways to leverage new technology.
There’s a fair amount of literature already out there about how PE firms can use data analytics pre-deal for due diligence and market intelligence. However, what’s often missing from the conversation is how data analytics can be used to create value post-deal.
Once a private equity firm has acquired a company, they need to focus on two key things: growing EBITDA and preparing the company for sale. Data analytics can play a key role in both of these activities.
PE Analytics for Growing EBITDA
There are a number of ways that data analytics can be used to increase EBITDA. One of the main ways is by analysing customer behaviour and sentiment.
Using a web analytics tool such as Google Analytics, private equity firms can track customer engagement with a portfolio company’s website and make changes accordingly. For example, bounce rates indicate how engaged visitors are with a website. If the bounce rate is high, this could be an indication that the website needs to be improved. A high abandoned cart rate might indicate that the checkout process is too complicated. Referral traffic can also be monitored to see which websites are sending visitors to the website and it can give you insights into their marketing process.
AI web analytics tools such as Heap.io take web analytics to the next level. They allow private equity firms to track every user action on a website and see the journey that they took, giving deeper insights into customer behaviour.
Review and social media analytics
Tracking consumer behaviour only tells you part of the story. You still need to apply guesswork and intuition to figure out why people are behaving in a certain way. But customers have several channels where they can tell you exactly what they think. Private equity firms need to be monitoring these channels to get a fuller understanding of customer sentiment.
This is where review and social media analytics come in. There are now a number of AI-powered tools that can analyse reviews and social media posts to extract key insights about customer sentiment.
At Symanto, we’ve developed tools that implement the most advanced natural language processing (NLP) technology capable of understanding and extracting meaning from nuanced and complex human language.
Our software is able to read and understand reviews in multiple languages, identify key topics and sentiment, and generate actionable insights for private equity firms looking to improve their portfolio companies.
For example, our topic detection and sentiment analysis technology can be used to identify negative sentiment around a particular area of a company. How do customers feel about price points, key features of the product, customer service, etc.? You can also use this technology on other data sources such as CRM data, chatbot transcripts and customer surveys.
By analysing customer sentiment, private equity firms can identify upsell and cross-sell opportunities, optimise pricing, and improve customer retention.
Data analytics can also be used to reduce costs. For example, by analysing supplier invoices (PDF), private equity firms can identify areas where the company is being overcharged, negotiate better terms with suppliers, and optimise inventory levels.
PE Analytics for Prepping a Company for Sale
The other key focus for private equity firms post-deal is preparing the company for sale. This usually involves a number of initiatives such as divesting non-core assets, streamlining the organisation, and implementing best practices.
Data analytics can play a key role in all of these activities. For example, private equity firms can use data analytics tools to identify which assets are non-core by tracking which of them are underutilised or not used whatsoever. They can also use data analytics to help streamline the organisation by identifying duplicative processes or unnecessary steps.
Data analytics is a powerful tool that private equity firms can use to create value for their investors. Private equity firms can use data analytics to:
- improve value creation through pre-sale due diligence,
- boost EBITDA and maintain competitiveness post-deal,
- monitor customer sentiment,
- reduce costs, and
- prepare companies for sale more effectively.
Get Started with Symanto
If you’re a private equity firm looking to improve your value creation strategy, get in touch to learn more about how our data analytics tools can help.