Business Intelligence in Private Equity

importance of BI in this Data era

According to MIT Technology Review, 95.5% of business data is never used, resulting in lost insight and clarity. Left unsolved, the lack of actionable data leaves deals and management teams resigning themselves to a suboptimal level of controlled chaos and confusion.

“Through data analysis, business operators can get a clearer view of what they are doing efficiently and inefficiently within their organizations. When a problem is identified, professionals are capable of answering crucial questions.” – Michigan State University

For outsmarting the competition, one needs to put data to work to support smarter, faster decision making.

Data and its insights should not be limited to only limited number of people, but throughout the organization to make sure everyone is working the most profitable veins with the best tools.

what is BI?

Wikipedia:

Business intelligence (BI) is a set of theories, methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information for business purposes.

BI can handle large amounts of information to help, identify and develop new opportunities.

Making use of new opportunities and implementing an effective strategy can provide a competitive market advantage and long-term stability.

PE companies have mission

  • To increase portfolio company value through add-ons
  • To improved gross margins
  • Operational efficiency

Successful companies that are attractive to future investors need actionable data and clear KPIs to provide transparency and focus.

PE managers and their operating team members are often finding themselves too busy in preparation of insights, reports and analytics which help them to achieve their goals.

But the struggle of almost all Private Equity companies are same.

struggles of PE companies

Unavailability of real time or Near Realtime insights

In the cut-throat middle market, investors need the ability to access near real-time data across portfolio companies, to accurately address and overcome barriers to growth. Yet most firms struggle to keep up with running the real-time reporting race needed to move companies forward, post-acquisition.

Usage of multiple applications in different technology, generates data in different variety, velocity and volume.

Portfolio companies are often using multiple ERP systems and have fragmented financial and operational data.

Absence of one view or arial view from the company data to know business health

  • Too many reports originate from too many disparate sources, and there’s too little time to separate signal from noise.
  • Investors need a cohesive financial and operational picture of their portfolio companies in order to remain aligned with executive teams on value-creation priorities. But with so many data inputs and variables, gaining a clear, shared picture can be a herculean task.

Lack of meaningful data for portfolio review

  • When executives become lost in unverified, inefficient operations, there is little time left to define and operationalize the KPIs needed to identify issues and initiate behavioural change. As a result, the executive’s role may devolve into a balancing act between managing the business and managing the board.
  • Access to meaningful data is the biggest portfolio review challenge, causes a PE firm to reduce its offer or walk away from a deal.

Traditional approach for tool and reports

  • For most portfolio management professionals, Excel frequently emerges as the analytical tool of choice.
  • Private Equity investors make investment decisions based on balance sheets and P&L statements – typically in Excel, the tried-and-true tool of choice.
  • Data in these spreadsheets is typically in tabular form, making it difficult to understand and analyse.
  • Getting business insights through excels and traditional reports are more or less snapshots, difficult to distribute, maintain.
  • The ability for Excel to provide a truly comprehensive picture of a Private Equity firm’s operations, financial status, and competitive landscape is limited, to say the least.
  • Excel files require manual assembly and updates, and the clock starts on obsolescence the moment they’re produced.
  • PE managers often end up beholden to Excel and its limitations in their efforts to understand the data and shape strategy.

Data mash-up

For many private equity firms, managing a portfolio of companies can feel more like controlled chaos than strategic execution.

Rather than spending time on key partnerships, hires, and acquisitions, deal teams are often consumed chasing down performance data in an effort to understand what’s happening on the ground.

Why? Because manually harnessing data is often a herculean task that interferes with daily operations.

Poorly designed BI landscape:

Yet most “progressive” companies opt for Mistake.

They are enthusiastic in deploying a data warehouse, and inefficient adaptation of BI tool which simply connect the data sources. 

While data connectors in leading BI tools such as Tableau, Cognos, and Power BI do provide a quick way to access data and prototype reports, the resulting mash-up systems scale poorly and deliver limited functionality, creating “technical debt”.

how BI can help PE companies?

  • Information is not the goal for private equity portfolio managers and executives. Better execution is, and shared, real-time visibility into the right performance metrics is the most accessible means of operationalizing strategy and transforming companies.
  • A robust data analytics program help PE firms drive competitive advantage
  • By embracing industry-leading business intelligence tools, investors can graduate from slow-moving Excel analysis to real-time reporting that translates into growth.
  • BI can help them to uncover profit generating opportunities within portfolio companies.
  • BI can help them make quicker and better go or no-go decisions for potential acquisitions
  • BI accelerate the due diligence process
  • Data analytics allow to examine market trends that may influence a profitable exit strategy
  • Data-driven dashboards allow investors to more effectively manage their portfolio companies and having ready access to KPI data maximizes the perceived value of a company at exit.
  • All stakeholders – from investors, to limited partners, to executive teams and line-operators – have access to the same data, creating transparency and shared accountability throughout the chain of command.
  • BI enables Private Equity firms to quickly access the timely and robust information they need to drive growth―prioritizing opportunities and reallocating resources to address these opportunities.
  • Delivering an accurate, real-time picture of performance, from finance, to sales and operations, is not only the best way align focus at all levels of a company, this level of private equity business intelligence demonstrates a mastery of the business to potential buyers and maximizes valuation.
  • Data intelligence is the key to controlling outcomes, and to demonstrating that control is key to defending valuation.

analytics for PE

We are delivering sophisticated technology, analytical and reporting solutions to drive smarter investment decisions.

A powerful visualization tool that drives a range of functionality for clients.

BI delivers deeper insights and helps improve investment outcomes:

  • To select and monitor top performing funds within a particular category
  • To improve your team’s product development and competitive positioning capabilities

Few analytics, report listing is as below:

  • Monitor portfolio and funds
  • Identify the factors responsible for investment performance
  • Analyse performance and risk versus other funds
  • Peer groups and benchmarks
  • Produce custom reports highlighting insights
  • Portfolio and risk analysis
  • Investment monitoring and surveillance
  • Performance Attribution
  • Calculate manger return components relative to selected benchmarks, including factor exposure, security selection, timing and excess return, and asset class.
  • Evaluate risk-adjusted component performance and significance of component return.
  • Rank all performance measures within a specific peer group.
  • Risk Analysis
  • Risk Attribution: Calculate the risks for:
    • Fund Monitoring Dashboard
    • Portfolio Forecast

what is in BI technology?

A typical architecture of Data and BI technology:

Business intelligence software are the tools that make it possible to create value from data. Some examples of business intelligence technologies include data warehouses, dashboards, ad hoc reporting, data discovery tools and cloud data services.

There are two subsets of tools to consider here.

1.Data pipeline: data collection and storage

The strategies used by a business to collect and store data are often known as the data pipeline. The tools used in the data pipeline will fall under the label of data engineering.

One class of tools are those used to collect and store data.

  • Salesforce and Hubspot: collect data on various aspects of a company’s visitors.
  • Amazon Redshift, Google BigQuery, and Snowflake: allow businesses to store their data in scalable data warehouses.
  • Fivetran and Stitch: can make it easy to connect data generators into data storage.

2.Business intelligence tools: data analysis and reporting

Other tools are used to analyse and report on data; these are the products that are referred to as business intelligence tools.

Setting up these BI tools:

  • Allow you to connect to and query data repositories in order to analyze the data.
  • They let you create visualizations and dashboards that are easy to read and understand.
  • Good BI tools let you generate and send out reports to stakeholders so they can monitor performance indicators at a high level.

The most important types of business intelligence tool features and functionality are:

  • Dashboards – Data Mining
  • Visualizations – ETL
  • Reporting – OLAP
  • Predictive Analytics – Drill-Down

A variety of different types of tools fall under the business intelligence umbrella.

There are tons of vendors and offerings in the BI space and wading through them can get overwhelming.

Does Your Private Equity Firm Need A Data Warehouse?

A data warehouse is the single, structured repository where all the data you need to produce reports and dashboards is organized. It’s the sole source of truth for a company and the engine behind business intelligence.

Raw data pulled straight from transactional systems is generally not report-friendly, but that can be overcome.

Think of your data as a jigsaw puzzle. Each piece is virtually meaningless on its own. Gathering all the pieces into a pile does not improve the situation much. But by organizing them by type and fitting them together, patterns emerge to eventually reveal the big picture. This is the role of the data warehouse.

  • Before few years, thinking and having a data warehouse, going to be a big challenge to design, develop, implement, maintain. But now a days, any business can join in data revolution. Data warehouses are much easier and more affordable to deploy than just a few years ago.
  • Cloud services, agile BI systems, and integrated tools such as Microsoft’s Azure, Amazon web services, Google Cloud services make it easier.
  • Power BI and other leading data intelligence tools shortcut waterfall development, allowing companies to deliver insights early and often, in parallel with building a reliable, scalable data warehouse.
  • When it comes to private equity business intelligence, the modern data-warehouse-as-a-service makes that possible in short order and at a comparatively nominal cost.
  • Standing up a SQL data warehouse in-house (with the requisite licensing, backup, disaster recovery, administration, and maintenance) requires a large capital investment and weeks or months to deploy.
  • On Azure/Amazon/Google cloud services: warehouse can be done in days as a variable expense. The result is a cost-effective, tightly integrated system of built-for-purpose tools that are durable and flexible when it comes to scaling, validating data, adding new data sources, and dealing with almost any curve ball you can think of. 
  • Mash-up systems and Excel, by contrast, are less flexible and far more apt to break when changes occur.
  • Set your data system up right, and you’ll have the foundation for maintaining clear, real-time visibility into performance throughout your organization. 

services

Our business intelligence consulting and coaching assists you all the way through the implementation to the use of our software, so that you can quickly get value from it.

Besides, our BI expertise will help you go further in your analysis and gain better acumen from your data.

BI strategy

To be a successful PE company, one must have BI Strategy.

Data is an asset. Data is capital. Business is blind without accurate data insights from which they can take the decisions.

To get the success in this ever-changing global market to make business data valuable, BI strategy is inevitable.

We help to design the winning Data intelligence strategy.

Strong BI strategy includes:

  • Current business state
  • Company vision (Future state)
  • Roles or key personas, who will use the analytics
  • Key departments which requires BI dashboards
  • Catalogue of data sources
  • KPI, essential for the success of the business
  • Dashboard, Reports and Scorecards
  • Data governance plan
  • BI implementation plan
  • BI committee to review company’s BI initiatives