How PE firms want to remain competitive

While investors are searching for returns and turn to private equity due to previous successes, PE firms are hassled by additional non-investment tasks such as regulatory reporting and reporting for investment clients. To build a viable model for the future, PE firms need to maintain their efficiency and cost-effective operations.

In the 2017 Global Private Equity Survey, Ernst & Young (EY) and Private Equity International investigate, how yesterday’s challenges provide a foundation for the future success of private equity firms. For CFOs of private equity firms, talent management, leveraging technology and outsourcing are key success factors.

First, talent management, i.e. engaging, training and retaining promising employees, is vital for future success. However, CFOs state that this role has become increasingly difficult as Millennials demand more motivational factors than just a generous salary and career development. Because CFOs expect young talents to stay with their companies for less than five years, the logic behind talent development becomes questionable. CFOs must thus find a way to retain young and motivated graduates.

Second, data and digitalisation offer opportunities to automate processes and enhance efficiency, while also being able to locate new investment opportunities. After first investments into technology, firms start to see the how digital platforms improve the communication between them and investors as well as regulators. Moreover, analysing huge amounts of data, companies are beginning to take advantage of less tactical investment opportunities that may not have been considered in the past.

Finally, PE firms want to outsource non-value-adding functions to qualified service providers such as administrative and tactical tasks. Thereby, CFOs plan to free up staff and spend more time on identifying investment opportunities, constructing portfolios and building relationships with investors. However, they remain concerned about the ability of vendors to deliver consistent, high-quality services and thus search for viable models that make outsourcing work in the long term.