The Rising Importance of Artificial Intelligence for Private Equity Deal Sourcing

A Private Equity fund’s deal origination strategy has the power to truly differentiate it from other competing investors. Historically, funds relied heavily on their network and their investment banking advisors to source deals. While many funds still largely source deals through these more traditional methods, the rising competition during the auction process among Private Equity firms is pushing them to adopt both a more proactive and more data-driven deal sourcing strategy. 

It is now imperative that Private Equity funds adopt a proactive approach to deal origination. Relying on their network and intermediaries is not sufficient anymore. To successfully originate and close deals in today’s market, Private Equity funds must adopt a more proactive deal sourcing approach to identify companies faster, at an earlier stage and more extensively. To do so, they need to leverage data with technology in combination with human analysis to find the best opportunities. Typically, an analyst would read the news, browse various data providers, and speak to M&A advisors to try identifying companies ready for investment. However, modern algorithms make it possible today to analyse millions of data points in the news, on companies’ websites and financial databases to generate custom and pertinent lists and identify which companies might be appropriate for investment or an M&A transaction.

On the upside, the exponential rise in the availability of data and companies’ increasing online footprint – through company website, blogs, social media and news – represents an opportunity for funds to adopt a more data driven strategy when looking for new investment opportunities, build-up opportunities for their portfolio companies or identifying market trends and emerging sectors. Unfortunately, most of the time Private Equity investors do not have the right tools in place to ingest and analyse such large volumes of data and therefore miss the opportunity to leverage this new data paradigm. Historically, many funds were making use of data providers to identify and gain visibility to a higher number of companies. However, the data collection and analysis work remains very manual, time consuming and inefficient especially when it comes to assessing and selecting relevant companies among a very long list of companies and various data sources. Data collection, preparation and analysis are areas where new tools are required. The challenge now is to find out how to make the data speak. With SEALK we are offering this type of tool, providing Private Equity firms with a powerful and intelligent search engine and a data processing solution.

SEALK allows investment teams to expedite the process of identifying potential investment targets (for platform or add-on investments) by making use of AI algorithms to exhaustively swift through a multitude of data sources and extract key opportunities tailored to one’s investment thesis. Pertinent investment opportunities are recommended by SEALK, which enables companies to find targets they would have never found in such a short time frame before.

Identifying build up opportunities is now a prerequisite for Private Equity firms not only after making an investment but also before the investment to convince the firm to onboard the Private Equity firm. SEALK provides powerful search features that enable Private Equity funds to screen sectors, identify new investment opportunities, generate list of build-up opportunities, or understand market trends. With SEALK, Private Equity funds can identify companies faster and at early stage reducing the number of opportunities missed and maximising their deal sourcing activities by acting before other funds.

Comments are closed.