By: Harry Hedges, knowledge lead for transformation appointments.

 

I'm noticing more and more, from recent conversation with clients, there is a significant focus by PE-backed portfolio companies on driving the implementation of digital tools, with a view to drive value creation.

 

 

A recent topic that’s has been coming up with my clients is around ‘embracing digital tools’ -particularly, how private equity firms can achieve faster returns on their investments and create more successful, scalable businesses that generate higher exit values when they sell or go public.

 

Digital transformation in private equity is about using technology to make the companies invested in, more efficient and valuable.

 

We've recently worked with clients on roles that have put in place digital tools to automate tasks, use data and AI to make better informed decisions, and enhance cybersecurity to prevent hacks and cyber attacks.

 

Other examples I've noticed also involves using tools to streamline operations, improve customer service and customer experience, and modernise outdated systems.

 

By embracing new technologies, these companies can grow faster, work smarter, and stay competitive in the market.

 

And of course, in order to drive the implementation of digital technologies in businesses, certain skills are often in demand by PE-backed portfolio companies to oversee elements of digital transformation.

It is not uncommon for PE firms to typically hire someone to oversee digital transformation at key stages of the investment process, especially when they need to unlock value and accelerate growth.

 

Some of the most common scenarios within this scope might include:

 

Post-Acquisition Integration
After acquiring a company, digital transformation experts can help integrate IT systems, streamline operations, and drive efficiencies across newly combined entities.

 

Underperforming Companies
If a portfolio company is struggling with outdated technology, inefficiencies, or slow growth, a digital transformation leader can revitalise the business by introducing modern solutions like automation, cloud systems, or data analytics.

 

Scalability Challenges
When a company is growing rapidly but its current technology can’t keep up, digital experts are needed to implement scalable systems and ensure the business can handle future demand.

 

Preparing for Sale or IPO
Before selling or taking a company public, private equity firms often invest in digital upgrades to improve performance, boost profitability, and make the business more attractive to potential buyers or investors.

 

Competitive Pressures
When a portfolio company faces increased competition or disruption in the market, digital transformation can be used to adopt new technologies that give them a competitive edge, improve customer experience, or expand into new markets.

 

We've delivered multiple digital transformation projects this year within PE assets. Whether it’s a carve out planning their IT strategy, or a business looking to roll out a new ERP to improve data visibility.

 

The Transformation space will be a huge lever in terms of value creation planning for acquisitions and current portfolio businesses for enabling growth. 

 

Coupled with the fact that funds are employing their own digital transformation operating teams and an increasing demand in transformation professionals becoming more attractive to PE-backed companies; 2025 will be likely present more opportunities for digital transformation professionals to look to improve data quality, systems and efficiencies in order to deliver crucial exits and shareholder value for their LPs.