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“Experience counts in matters of implementation of any kind of strategy, particularly where digital strategies are concerned.”
Managing Director of a PE firm
based in the U.S.
METHODOLOGY
In 2019, West Monroe, in partnership with Mergermarket, surveyed 100 executives of U.S.-based private equity firms that invest in middle-market organizations across a range of industries. The survey was conducted via phone.
Function at Firm
B2B vs. B2C
Firm Size
KEY FINDINGS
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Across the private equity investment lifecycle, digital...
DATA POINT OF MARKET TREND
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DATA POINT OF MARKET TREND (up to 3)
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WHAT WE'VE FOUND
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In the sky-high valuation environment that has defined the private equity market in recent years, the need to drive higher EBITDA returns—and faster—is an imperative. Digital investments present significant opportunities to address this need, but with shorter hold periods and deals moving fast, the ability to assess and execute digital investments grows more challenging. We surveyed 100 executives at private equity firms about how they prioritize digital investments, how they define it, and what technologies are driving the most value, among other things.
Half of our respondents said they always include digital value creation as part of their investment thesis, and another 34% said they often include it.
Only 42% of respondents to our survey said their firm has a standard definition of digital that everyone aligns to. And 40% said half or fewer of the companies they own have a documented digital strategy.
50% of PE executives said that making improvements quickly enough to have an impact is the greatest barrier to digital investment.
2-Minute Takedown
Which current macro trend is
driving your digital investments
in portfolio companies the most?
When do you typically try to
implement new digital solutions
at a portfolio company?
Digital technologies delivering
the most value at respondents'
portfolio companies
Within six months after acquisition Within a year after acquistion
Within two years after acquistion
Additional Resources
And, take our digital maturity quiz
Digital Leaders: Learn from Digitally Mature Companies to Grow Revenue and Profits
Keeping Pace With Digital Transformation: Accelerating Value From Your Minimum Viable Product
Digital Transformation: Separating Hype from Reality
Brad Haller
Director, Mergers & Acquisitions
bhaller@wmp.com
AUTHORS
Nick Hahn
Director, Digital
nhahn@wmp.com
59%
$100-250
million
7%
$600 million-1 billion
26%
$250-400 million
8%
$400-600 million
50%
B2B
50%
B2C
75%
Deal side
25%
Operating
side
82% said they view mature digital investments at a portfolio company as a value driver at exit and 75% said they make digital investments to improve the exit price without the expectation of performance gains before the sale.
PE firms appreciate the value of digital.
Not everyone lays the groundwork necessary for digital success.
Driving change and value over the hold period represents a top challenge.
Digital investment improves a portfolio company’s exit price.