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  • Writer's pictureChelsea Wilkinson

The potential for data to make (or break) a PE deal has never been greater than it is today

Around this time each year, I wait with bated breath for Bain & Company’s Annual Private Equity Report. (You’re right, I don’t get out much!)

This year didn’t disappoint.

2021 saw the sector become a US$1.1tn operation, with average deal sizes rocketing to US$1.1bn for the first time ever! Whilst the 57% year-on-year increase in average deal size might not come as a surprise on the back of Covid, the sheer volume of capital is eye watering. And that’s not to mention the US$3.4tn in dry powder!

However, beyond these stratospheric statistics, I was particularly interested to read the chapter on technology due diligence - a topic close to my heart and DataDiligence’s data due diligence offering.

Like us, Bain bemoans inconsistency when it comes to technology due diligence, suggesting that “only a small percentage of buyers perform due diligence aimed at underwriting tech-specific risks & opportunities”.

They add that the days of shipping in a trusted CTO to “kick the tires in the server room” are gone. Today, it “requires understanding how technology is being used throughout the company to improve performance & mitigate risk”.

We believe the same is true for data and the data ecosystem. And argue that data assets must also to be validated and assessed in the same way as any other commercial asset.

Bain suggested that investors need to ask themselves a series of questions relating to technology. We love their list - so much so that we have reproduced it below and merely replaced their word ‘technology’ with ‘data’ or ‘data ecosystem’. The list holds true.

🤔 How much does the target’s underlying data ecosystem play into value creation, both now and in the future?

🤔 Are we investing in data due diligence proportionately to the perceived value?

🤔 Do we have the experience—or know where to get it—to truly understand the data nuances in this particular space and to develop unique insights?

🤔 Is our data diligence integrated with the broader commercial and financial due diligence effort, so the insights and recommended actions are consistent with where the value lies?

🤔 Are these insights flowing directly into the value-creation plan to jump-start delivery on the investment thesis post-acquisition?

Click here for more about our Data Due Diligence offering.


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