AI reconstructs reality for private equity players from deal sourcing to servicing

Relationships and hands-on-portfolio management has been the order of the day for Private Equity players, enter AI and the industry is waking up to realign. The use cases for AI in Private Equity needs further interpretation and a genuine segregation of the fleeting from the more fundamental.

Abhishek Nanda a seasoned M&A, private equity and strategy professional opens up a word of possibilities that AI can provide to this high-pressure industry rife with risks. Nanda has spearheaded high-stakes transactions representing over $5 billion in combined enterprise value, views AI as a true catalyst. He believes that firms can leverage technology to uncover growth by driving smarter, & faster investments through sharper decisions.

Ditch the traditional approach to Deal Sourcing while mitigating risks

While effective deal sourcing remains the foundation of successful private equity and M&A deals, PE firms are now grappling with the challenge of balancing quantity with quality. When deals dry up as a part of the natural business cycle, the performance pressure on recent investments escalates and the focus shifts to making fewer but higher-quality investments. This is where AI can strike gold- in the sourcing process. AI can scan through news articles and social media, going beyond client furnished data, market reports and financial statements. It can act like a fine fishing net to capture high-potential opportunities that could slip out otherwise.  He said, “AI sifts through a vast plethora of information and brings out the relevant ones to the fore much quickly, uncovering new signals around product quality, customer feedback, and employee trends making the selection process smarter when clubbed with the personalized outreach

Speed, depth, & accuracy and the much-coveted due diligence

Teams wade through the prerequisites, like financials, legal documents and market research and most of the data unstructured rendering a snail’s pace to this process. AI, however, dramatically expedites this process. From analyzing customer contracts, customer interviews, compliance records, market reports and news articles one can easily identify potential opportunities from risks far more quickly and accurately. Abhishek Nanda quips, " Due diligence is a substantial cost and AI helps us catch red flags early which can help us allocate spending more effectively and make sharper & faster decisions," says Nanda. This deeper insight into risks allows firms to assess investments comprehensively, making the entire process more fool-proof and iron clad.  

Driving value creation with portfolio management

AI gets progressively transformative once the deal is closed and the focus shifts to operational performance and value creation within the portfolio companies. AI can bolster revenue by creating new revenue channels while sharply reducing overheads. for portfolio companies. Nanda explains, “Investors can leverage AI to dramatically increase efficiency in areas like customer support, software development, negotiation of legal contracts, and also tap into untapped growth opportunities. 

He further adds, that investors will eventually go a step further enabling portfolio companies to leverage AI for product and customer service innovation. Private Equity firms will use AI to differentiate their offerings playing an integral role in the expansion and growth of portfolio companies.

Nanda emphasizes that firms that integrate AI into their operations will emerge as valuable partners for their portfolio companies and lead the pack to drive lucrative returns, expand operational expertise, planned initiatives and above all place their bets on thoroughbreds.