When you talk to PE firms about Data Science. Some will talk very openly about what they are doing. Others will prefer to talk about anything besides Data Science. Very few have little to no capability in this area.
Some PE firms have built large teams of data scientists to compete against their rivals. Who can find the best deal. Who can find the most value. Who can drive the fastest portCo revenue growth.
First, what do we mean by Data Science.
Taking data, either publicly available or private data. Analysing that data, using automation (AI/ML) or not. Using that data to create insights. Using those insights to make business decisions.
There are three areas where data science is giving PE firms a competitive edge
- Pre-deal due diligence
- Post deal value creation
- Portcos own industry-specific usage
When it comes to Pre-deal due diligence, the challenge is getting data
The best PE firms get around this by sharing the gaps and assumptions they are using for their data models. They give their internal teams the opportunity to challenge these assumptions. This process helps build confidence in their data science capabilities.
Post deal value creation has less of a problem with data but a greater problem with consistency
The best firms have created data science toolkits that they give to their PortCos. These toolkits include data capture templates, value creation models and reporting guidelines. These toolkits are consistent, repeatable and easily deployable. All things that build confidence in the output.
Portcos can often have immature data science capabilities
The best PE firms bring with them sandbox data science models. These sandbox models will allow teams to grow their data science capabilities. They can start to bring insight to the decision-making processes sooner.
How would you benchmark your firms data science capabilities?
Do you get a sense that data science is delivering insight to help you make decisions in your portCos? What do you see the biggest area for improvement? Where does data science on your PE firm’s agenda?
Until next time.
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