October 13, 2023: Private equity (PE) CFOs hope to replace existing technology architecture with more robust software. Integrated data solutions, collaborative services, cloud-based modeling applications, and fully integrated cloud ERP are at the forefront.
This focus comes in light of a rapid drop in global deal volume in PE terms, dropping by 23.5% compared to last year. With higher interest rates, increasing costs of capital, and heightened inflation, investors are pulling back. Yet, with fewer investments, potential returns are stifled. Without promising significant future returns, CFOs must convince higher-ups of the benefits of redirecting money to development.
A Deloitte report demonstrates that improving back-office systems and processes is a leading lever when restructuring PE firms for effectiveness. Integrating advanced technologies can enhance data governance, streamline reporting, and provide more accurate potential acquisition targets.
On an individual company basis, demonstrating the return of technology updates takes time to prove. To do so, CFOs must outline the time advanced technology will save on human processes. Technology can empower PE employees to spend more time on high-value activities, boosting overall productivity and return per employee.
In a period of economic decline, when fewer deals are closing, CFOs should recommend to their firms that they allocate funds to the innovation and advancement of technological architecture.
Alongside these developments, PE firms are focusing on high-quality, long-term assets. Media, logistics, healthcare, and software are all top performers in the current market. By balancing internal improvements with an effective investment strategy, PR firms will weather the market circumstances and come out stronger on the other side.