Technology Advancements In 2023 For PE Firms: What To Look Forward To?

The realm of PE (Private Equity) firms has changed enormously in the past few years. Economic uncertainty, rising inflation, geopolitical risks, and higher interest rate have always created new challenges for PE firms. In Q3 & Q4 2022, the US PE market closed at $280.44 billion, witnessing a 20.4% decline from 2021. The Russia-Ukraine war is one of the primary reasons for this decline. Thanks to cutting-edge technology, PE firms have sustained in the market. This article will explain technology advancement in 2023 for PE Firms and what they should look forward to.

PE (Private Equity) firms in 2022

2022 saw a decline phase in PE performance. Healthcare, real estate, and technology industries continue to account for almost 50% of private equity transactions by value. In the Q1 and Q2 of 2022, PE firms witnessed a decrease of 9% in transaction value from Q3 and Q4 of 2021. Even the funding for PE firms decreased by 15% in 2022. The geopolitical environment and macroeconomics have triggered this decline. Here are the other factors that decreased the deal volumes, influenced market volatility, and reduced the pace of market growth:

• Interest rates spikes
• Post-pandemic impacts
• Record high inflation

PE firms using technology are ahead of their competitors and conduct automated transactions using data science. Digital transformation, CRM, data analytics, plug & play software, and data analytics helped the PE firms to sustain themselves in 2022. More than 50% of PE firms employ cutting-edge analytics tools and artificial intelligence to ease their situation. The use of technology helped PE firms improve their operations and increase the value of the portfolio company they invested in.

Technology advancements in 2023

As more and more investors allocate and invest money, PE firms will hold total assets of $5 trillion by 2023. ML (machine learning), AI (artificial intelligence), and ESG investments can completely transform the business as they seamlessly integrate with the PE industry globally.

AI and ML

AI and ML, help PE firms solve new problems using a self-learning algorithm. These technologies reduce human interference, reduce errors, and streamline the processes for PE firms.

• ML helps PE firms to detect new investment opportunities.
• AI helps to improve problem-solving skills,
• ML decreases the chances of errors, thus increasing overall efficiency.
• AI helps to analyze investment opportunities.

ESG investment

Evaluating the results of investments in terms of large environmental and social contexts has been a challenge. The covid-19 pandemic clearly showed how the environment, politics, and economics are connected. Thus, it is vital to consider the future impact of investment on politics, economics, and the environment. PE firms should evaluate the effects of investment on society and the environment along with commercial attributes. It is the called sustainable investment for the following reasons.

· ESG investment allows verification of the stability in terms of climate and its impact on the business.

· ESG gives future assurance and benefits from precise prediction.

PE firms are following these trends to measure their growth and investment risk. Even the PE giants like CG (Carlyle Group), APO (Apollo Global Management), BX (Blackstone Group), and KKR & Co have said that they leverage these new trends for their future growth.

Conclusion

PE firms are under pressure due to increased competition, rising stakeholder expectations, rising new technologies, unpredictable economic, and geopolitical uncertainty. Successful transactions demand the ability to move fast, drive strategic & rapid growth, and create additional value throughout the transaction lifecycle.

HungryGut is a tech-enabled company that offers digital transformation opportunities to aid PE firms in meeting market demands. PE firms can effortlessly meet their growth goals with our knowledge, experience, and innovative strategies. We also help PE firms create transparent, sustainable, and actionable value. Connect with our experts and learn more about the end-to-end digital transformation services we offer.