How Technology Innovation Improves the Traditional Buyer-Seller Relationship Paradigm for Private Equity Firms

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ACG and SAP recently co-hosted a full-day virtual event entitled “Maximizing the Value of M&A Through Technology.” The event focused on how capital markets firms can create value through AI, improve sourcing during M&A, increase company value with analytics, and avoid common pitfalls and pains during M&A processes.

Angie MacPhee, Managing Partner of Consulting at Baker Tilly, moderated the conversation, joined by Steve Young and Rich Lawson, Co-Founders of HGGC, a leading middle-market private equity firm and DealCloud client. Both Young and Lawson shared insights on driving returns, building a growth strategy for private equity firms, predicting how technology might continue to evolve, and using technology — such as DealCloud — to help firms manage investments more efficiently.

Read some of the key insights from this discussion, and learn how to improve and modernize your firm through technology.

Marrying Innovation and Tradition

Many private equity firms find it challenging to stand out and differentiate themselves from the competition. Like many others, Young and Lawson established their careers practicing traditional private equity strategy: fortifying personal connections, investing in more conventional industries — including construction and consumer services — and continuing to innovate and adapt to the changing markets via technology.

Acknowledging that marrying innovation and tradition is not easy, Young and Lawson agree that every business, regardless of industry or niche, should be tech-enabled by now. This mindset — and their own personal histories — has helped them guide conventional business owners and sellers in a more modern direction. In this way, HGGC’s own technology innovation has positively impacted the firm’s ability to communicate and facilitate technology improvements with portfolio companies.

“We can come in and speak [to] expertise around technology and how it relates to your old-line business,” Young said. “I think that really resonates with sellers.”

MacPhee added: “It’s always interesting to see some of the lagging industries that may not have been on the front end [but] are now actually leading the way in a lot of instances.”

Improving Dealmaking and Operations in a Post-Pandemic World

As the conversation progressed, the topic of the COVID-19 pandemic and its effects on the capital markets industry took center stage. In a trade where business is traditionally handled face-to-face over the course of several weeks, months, or years, private equity professionals suddenly had to build seller relationships, and source and finalize deals over the phone and via videoconference.

Young feels that the pandemic and this year of swift change has forced technology to evolve even faster to meet the demands of a quickly progressing workforce. Many private equity–backed companies had set growth goals that they planned to achieve during the course of 3 to 5 years, but the pandemic pressure-tested the market and forced companies to meet these goals in only a year’s time.

Thanks to technology like Zoom, most firms have been able maintain and build their relationships with ease. “We had a management meeting just the other day,” said Young. “That was the first time I’d seen [one of our vice presidents] in a year, and yet I felt like I didn’t miss a beat with him.”

Although buyer-seller relationships should ideally be built in person, many firms like HGGC have benefitted from the prevalence of technology during the course of the past year. These relationships will continue to remain strong as long as firms remain dedicated to nurturing these relationships.

Gaining a Leg up as a Tech-Forward Firm

As a strong advocate for innovative technology in private equity, it’s no surprise that HGGC uses only best-in-class technology to manage its portfolio companies and investments. Lawson credits DealCloud as the custom-built platform that allows him to efficiently manage more than 6,000 potential portfolio companies and tens of thousands of employees.

“As a tech-focused investor, we were very early on adopting technology that could enhance our work,” Lawson notes. “Back in 2017, we adopted DealCloud for CRM and pipeline management. Everyone talks about using data to make informed decisions, but you need a platform that makes the data part of your daily routine — and DealCloud does that. It’s really helped our collaboration and decision-making throughout the pandemic.”

Although tradition still remains a key component in the firm’s business strategy, HGGC found that implementing the purpose-built technology of DealCloud has helped them modernize, stand apart from competitors, and better guide portfolio companies.

Ready to try a custom-built solution at your own firm? Try DealCloud today. Schedule a demo.

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Author:

Katlyn Kohler

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