Private Equity Using New Technologies, Tactics to Deliver Investor Returns Despite Decrease in Global Dealmaking

PE M&A Professionals Expect Due Diligence to Speed Up in Next Five Years

MINNEAPOLIS--(BUSINESS WIRE)--Despite a decrease in global mergers and acquisitions (M&A) year to date, private equity (PE) professionals, especially in North America, are leaning into new tactics and technologies, including the use of artificial intelligence, to deliver investor returns. This is according to findings from the Invest in Insight: Private Equity Market Brief report from Datasite®, a leading cloud-based technology provider for the M&A industry, and PitchBook, a financial data and software company.

The report, which is based on market data and a survey of over 500 global PE professionals, shows that PE professionals are actively investing by using new tactics, such as providing credit lines, engaging in private investments in public equities (PIPEs) and contributing to special purpose acquisition companies (SPACs) to capitalize on opportunities to buy publicly listed companies. Additionally, the report highlights the potential for emerging technologies, including AI, to speed up the due diligence process, which more than two thirds of respondents see as the most important success factor, yet also the most time-consuming phase, of the M&A process. In fact, most PE professionals (61%) expect AI to shorten the average time to complete due diligence to one month or less by 2025 compared to the one to three months it takes today.

PE firms are deploying more equity and paring back debt in their portfolio companies to shore up business stability and survival rates. Given this focus on flexibility, dealmakers are also adapting their approaches to due diligence.

“The pandemic has dramatically disrupted deals, yet PE dealmakers have increased adoption of remote due diligence processes to continue investing,” said Rusty Wiley, Chief Executive Officer of Datasite. “To further set themselves up for success, PE firms should evaluate solutions that can support workflow and due diligence and integrate AI and machine learning for team collaboration.”

Still, demands from investors are changing. Environmental, social and governance (ESG) and data privacy regulations are an important and growing consideration in M&A due diligence. In fact, 75% of PE dealmakers say they worked on M&A transactions that have not progressed because of concerns about a target company’s ESG credentials, and 36% say the same of a target’s compliance with data privacy regulations.

The good news is that this year’s deal decline is expected to plateau at a healthier level compared to the decline stemming from the Great Recession in 2008/2009, as PE firms continue to retain sufficient capital to carry them through a sustained period of economic distress, the report shows.

Survey results supporting the market data included in the report were captured in this year’s first quarter. To learn more about the new findings, please visit: www.datasite.com.

About Datasite

Datasite is a leading SaaS provider for the M&A industry, empowering dealmakers around the world with the tools they need to succeed across the entire deal lifecycle. For more information, visit www.datasite.com

About PitchBook

PitchBook is a financial data and software company that collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape, including public and private companies, investors, funds, investments, exits and people. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.