Digital at the Speed of Private Equity

18 June 2019

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Digital transformation is fundamentally altering the way most industries do business. And in the sky-high valuation environment that has defined the PE market in recent years, the need to identify innovative and effective investment angles to create value has never been more pressing. Looking ahead, it is the ability of PE firms to develop digitally-led investment theses, carry out effective digital diligence, and deliver on their strategies that will separate the industry’s best and weakest performers in the years to come.

To better understand the obstacles facing firms’ digital investments and the strategies they’re using to overcome them, West Monroe commissioned Mergermarket to survey mid-market US fund managers for their insights.

Key findings include:

• Half of respondents say they always include digital value creation as part of their investment thesis, and more than a third say they often include it.

• Fifty percent of PE executives say that making improvements quickly enough to have an impact before the end of the hold period is the greatest barrier to digital investment. As a result, 84% of respondents say they aim to implement a digital program at a portfolio investment within the first year after acquisition, and 26% try to do so within six months.

• Three quarters of private equity investors make digital investments in order to improve the exit price for a portfolio company without the expectation of performance gains before the sale.