SOLUTIONS FOR PRIVATE EQUITY
Leverage Data & AI for Portfolio Value Creation
PRIVATE EQUITY LANDSCAPE
Rising interest rates and intense competition have stalled growth in private equity.
For private equity firms, the rapid rise in interest rates and heightened competition in 2023 has resulted in sharp declines in deal-making, exits, and fund-raising.
According to Bain & Company's 2024 Global Private Equity Report, these market conditions have led to a significant amount of capital sitting on the sidewalks, a high number of unexited assets, increased pressure to generate EBITDA, and investors are seeking “safer” investments.
- Significant Capital Sitting Idle: A record 26% of global buyout dry powder—capital that private equity firms have committed to investments but have not yet invested—is now four years old or older, putting general partners under growing pressure to execute deals.
- High Number of Unexited Assets: The backlog of unsold assets, now worth $3.2 trillion, has hindered the flow of capital back to investors and stymied new fundraising efforts.
- Increased Pressure to Generate EBITDA: With close to $300 billion in leveraged loans coming due by the end of 2025, the pressure to generate EBITDA is intensifying.
- Investors Seeking Stability: While technology remains the leader in deal count, there is a noticeable shift towards industrials as investors seek safer investments.
SUCCESS FACTORS
For sustained success, private equity firms must excel in three critical areas.
Deal Sourcing
Effective deal sourcing is crucial for private equity. Firms must build strong networks with industry experts, brokers, and advisors to access lucrative deals early. AI enhances this by providing unified portfolio analytics and market analysis, scanning for opportunities, performing detailed due diligence, and developing valuation strategies. AI also generates personalized email drafts for targeted outreach.
Value Creation
Rapidly improving EBITDA is vital for driving growth and maximizing returns. This involves implementing best practices to optimize operations, streamline processes, and reduce costs. AI can significantly enhance value creation by identifying high-impact use cases like demand forecasting, customer segmentation, and operational optimization. Advanced analytics drive cost reduction, improve pricing strategies, and enhance customer experiences.
Exit Strategy
Strategic exit planning is essential for realizing investment value. It includes thorough market research to determine optimal timing and conditions for exits, using models to assess portfolio company value, and crafting narratives to attract buyers. AI-driven insights analyze market trends, potential buyers, and valuation models, ensuring alignment and smooth transitions through stakeholder engagement.
Businesses that are data-driven and AI-powered consistently outperform competitors.
OneSix will help your PE fund and PortCos get there.
DATA & AI IN ACTION
Improving investment decision-making for the fund—and enhancing marketing capabilities for the portfolio company.
For private equity firms and their portfolio companies, AI signals a new era of efficiency, insight, and competitive edge. Its ability to analyze vast datasets, predict market trends, and optimize decision-making processes propels PE professionals towards more informed and strategic outcomes, driving innovation and growth. OneSix has helped several funds and their PortCos leverage data and AI for growth.
Private Equity Fund
Pain Points
- Data Complexity: Fragmented data sources from multiple portfolio companies hindering the ability to build advanced analytics and reporting.
- Financial Accuracy: Potential to enhance the capability to predict financial outcomes and identify risks of potential investments.
Solutions Developed
- Real Time Deal Research: Summarize data from company research sources (e.g., Pitchbook) and find past deals through a chatbot.
- Client Fund Chatbot: Connect to internal financial systems/data warehouse to ask Fund/Client questions.
- Contract Review AI: Learn from past redlines & suggest tweaks to new NDAs and other contracts.
Impact
- 25% increase in operational efficiency due to automated data integration and reporting.
- Improved investment decision-making with a 30% higher accuracy in financial forecasts.
Portfolio Company
Pain Points
- Limited Visibility: Minimal and delayed reporting of channel spend at national-, regional-, and local- (franchise-) levels.
- Inability to Improve Marketing ROI: Difficulty making strategic channel investment decisions because of a lack of empirical impact measurement strategy.
Solutions Developed
- Marketing Data Warehouse: Centralized all of their marketing and marketing-adjacent data in a data warehouse. Leveraged PowerBI for real-time reporting.
- Marketing Optimization: Implemented a marketing mix modeling (MMM) pipeline to recommend optimal marketing budgets across levels.
Impact
- Full automation of marketing budget allocation and spend/impact reporting.
- 15% improvement in prospect sales attributable to optimized marketing allocations across channels.
DATA & AI SOLUTIONS
OneSix offers a comprehensive Data and AI Strategy service designed to transform your data into business value by leveraging AI/ML. Our approach involves four steps.
Assessment
FREE | 5 MINUTES
Workshop
FREE | 3 HOURS
Roadmap
Optimization
Assessment
We conduct a thorough assessment of your current data landscape and identify gaps. There are 7 components:
- Data Strategy and Alignment
- Data Infrastructure and Management
- Data Accessibility and Usability
- Advanced Analytics and AI Fundamentals
- AI Operations and Infrastructure
- AI Applications and Use Cases
- Data and AI Culture
To kick it off, your team must complete our Data and AI Maturity Assessment form. This data will be used to customize the workshop content, ensuring it addresses your unique challenges and goals.
Workshop
During a 3-hour workshop, we provide a structured approach to identifying, prioritizing, and implementing AI solutions that can drive significant business value.
| Introduction & Trends in AI: Discuss current trends in AI and their impact on various industries. | 45 Mins |
| Prioritize AI Use Cases: Collaborate on prioritizing AI initiatives, focusing on immediate, near-term, and future opportunities. | 75 Mins |
| Roadmap Development: Develop a high level roadmap for implementing selected AI use cases, including necessary foundations, timelines, and resources. | 60 Mins |
Roadmap
We create a roadmap for implementation, including data integration, governance frameworks, and the establishment of AI capabilities.
Optimization
We provide ongoing support and training to ensure your team can effectively manage and utilize the new systems and tools.