Case Study — 1 Mar, 2023
A Private Equity Firm Automates Due Diligence to Stay Ahead of the Curve
THE CLIENT:A large U.S.-based PE firm with global offices |
The global private equity (PE) industry had what could be a record level of cash reserves available for buyouts and other investments as of December 15, 2022, when firms collectively held an estimated $1.96 trillion U.S. in dry powder.[1] |
USERS:Data science team |
However, private markets data source Preqin predicted fundraising would slow significantly in 2023, citing the effects of more sluggish economic growth and a decline in dealmaking on private equity fundraising cycles.[1] While risk-averse investors may shift money away from PE, others are eyeing an opportunity and taking steps to seize it. Being prepared to move quicky to capitalize on opportunities is more important than ever. |
This large U.S.-based PE firm focuses on the technology sector that, after years of soaring above the economy, was dragged down in 2022 as growth stalled, markets sputtered and stocks plunged.[1] Despite the unfavorable environment, PE firms are not expected to stay on the sidelines. In addition, according to a survey by S&P Global Market Intelligence ("Market Intelligence"),[2] many are looking to leverage data and technology to create an edge in deal sourcing and due diligence. This includes exploring insights from a broader range of data sources and using AI applications to make sense of increasingly unstructured datasets that were previously inaccessible.
This firm is no exception, and the executive team wanted to sharpen its deal sourcing and due diligence processes to better compete for dealflow. The firm brought together a small team of highly experienced data scientists to create a more automated way to evaluate deals.
Pain Points
This PE firm had been a long-standing client of Market Intelligence and an active user of the S&P Capital IQ Pro platform. This is a one-stop solution that provides access to an extensive set of data, tech-forward productivity tools, news and research. Given the competitive environment, members of the newly formed data science team wanted to complement this with a faster way to access data and feed it into internal due diligence applications. They would then generate reports to send back to the firm's investment specialists. In particular, the team wanted:
- An API for more automated data access.
- Extensive financial data on publicly traded companies.
- Real-time financial forecasting measures from brokers, such as upgrades/downgrades, target price revisions and market-moving news.
They reached out to Market Intelligence to discuss how to put this in place.
The Solution
Market Intelligence specialists described the firm's API solutions and datasets and how the data scientists could test the offering to ensure that it met their needs. Together, these capabilities would enable the team to:
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Quickly ingest data in internal applications |
The API solution, using Restful APIs, provide on-demand enterprise data access securely and with few resources. Developers can leverage web services to dynamically access S&P Global datasets and curated third-party datasets or interact directly with the web services via REST/JSON. They can pick and choose the data needed without hosting a database. |
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Do a deep dive on the attractiveness of public companies |
Premium Financials provides standardized data for 5,000+ financial, supplemental, and industry-specific data items for 150,000+ companies globally, including 95,000+ active and inactive companies across multiple industries.[1] Data is available at numerous frequencies and point-in-time representations of a financial period include press releases, original filings and restatements. Estimates provides standardized global, real-time financial forecasting measures, such as upgrades/downgrades, target price revisions and market-moving news. It includes estimates based on projections, models, analysis and research from analysts, brokers and companies themselves. Annual, quarterly and semiannual time periods are available for 18,000+ companies spanning history from 1996 for international companies and 1999 for North American companies. |
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Have access to specialists when needed |
Implementation and ongoing support are available to help ensure that team members get the most out of the solution. |
Key Benefits
The API coupled with financial and estimates data met the data scientists' need to drive internal due diligence models in a more automated and efficient manner to capture dealflow in a competitive environment. They subscribed to the solution set and now have:
- A delivery option that can be customized for their particular needs.
- The ability to quickly leverage detailed data from a trusted provided.
- A complement to the desktop offering that can be used for more ad hoc inquiries.
- An attractive licensing agreement to be able to share data with other groups within the firm.
[1]"Global private equity dry powder approaches $2 trillion", Preqin Pro on S&P Global Market Intelligence, December 21, 2023.
[2]"Sensing a shift in private equity fundraising; record PE dry powder", S&P Global market Intelligence, December 23, 2023.