A $27 billion private-equity investor identifies a budding team of experts that will determine who wins the biggest deals in the future
- A few private equity teams already employ data scientist teams, and more will do so in the future.
- Firms could win having the best information about a company they're bidding for rather than winning a deal just on price, said one private equity executive.
While private equity firms have long-used humans and connections to find investments, they're increasingly turning to more high-tech means.
Ian Charles, an executive at $27 billion dollar private equity firm Landmark Partners, said his team already works with "the small handful of groups that exist today" to better understand how data matters in deals.
"Ten years from now, all the big private equity firms will have teams of data scientists that are deployed on buy-side due diligence, sell-side due diligence and operational improvements," Charles said on Thursday night, at Bloomberg's Private Capital conference.
"If a major buyout player has a big data approach to understanding revenue streams of a company that they're in deep due diligence on, they may actually understand revenue trends on that company over the next 12 months better than management."
He said private equity firms can gain an edge by having the best information about a company they're bidding for, rather than just competing on price.
"Even if they lose on price, sometimes management will be so impressed with that data and how it can help them manage their business better, they'll find a way to bring them into the deal in some sort of security that does justify the risk," Charles said.
He predicted both investors and investment managers will utilize data teams.
Private equity firm EQT has said it uses software to help source deals and Blackstone is just starting to build out a data analytics team.