September 15, 2017
Interviewed by: Privcap
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Private Equity Value Creation: Unleashing Advanced Analytics

Private equity experts discuss how investors can help their portfolio companies add value through data analytics.

Private equity experts discuss how investors can help their portfolio companies add value through data analytics.

Private Equity Value Creation: Unleashing Advanced Analytics

The best PE firms help their portfolio companies use advanced analytics

Luke Johnson, Sentinel Capital Partners:          

We have an in house IT team that understands the backbone of IT infrastructure, the right systems, the right processes today, the best and latest technologies. That’s a value add that often times these management teams, or these owners of businesses, don’t have exposure to or don’t necessarily have at their disposal.

Pricing is a key area that analytics can address

David Spaight, Arsenal Capital Partners:

Several businesses I’ve run in the past, with multiple different sites, we found have radically different pricing policies they were using. [They] would actually have some of the larger global players come to us and ask, “Why can they get better pricing at site A versus site B or site C, right all the way down through?” We look for consistency in terms of how we do the pricing to begin with, number one. Number two, the more information we have on our clients—and really understanding the end users in each of those things—allows us to price appropriately. We want to make sure, as we’re building strategic relationships with a number of these different types of accounts, that we’re putting in the right pricing systems in order to maintain that type of relationship.

Many PE firms collect data across their portfolios to drive better decision-making

Herb Engert, EY:

These private equity shops—some of the largest shops actually are some of the biggest employers in the U.S. right now. There’s a massive amount of data. You can leverage the same ideas across a portfolio. If you did a project in one particular area, you analyzed particular data set and one company around their product profitability, let’s say, or pricing—that’s a big area. The pricing, and the sensitivity to product profitability in margin, based on the pricing. If you did that and you had the same data sets, you could actually quickly apply that across your entire portfolio and see if there’s an opportunity, right? I think it’s going to allow you to make better decisions as to where you would employ your time and your effort.

Spaight:          We’ve increased the visibility into the account, both in terms of the users—your end-use customers—and the activity levels taking place from that aspect, their buying patterns. All of those types of components … just make it much more productive to be able to capture all of that information. Then, as you’re deploying your sales teams, again, those opportunities—they’ve got more transparency into those client accounts so that we can continue to capture more share and continue to build that out.

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