December 2022 | Report

2023 Outlook: The Future of the Private Equity Industry

Economic hurdles exist for private equity firms—and those that succeed will use digital and data to drive value with their deals

Private equity has experienced years of high deal volume and sky-high valuations. But as rising interest rates, inflation, and threats of a recession continue to impact the economy, the future of private equity is in flux as firms are forced to compete more aggressively for good deals—or to find ways to ratchet up the value of the struggling companies they’re able to snatch up at a bargain. With this increased pressure, private equity firms should be looking at how leveraging data and industry trends can continue to redefine the deal process to be faster and more impactful—and what to do with the insights that data provides to come out on top in 2023.

2-Minute Takedown

Data-driven insights

Data (and how it’s used) remains an essential consideration throughout all stages of the deal cycle, and the pressure is on to develop accurate and timely insights to assess value and drive operational outcomes. PE firms must now find ways to incorporate data and digital solutions to create maximum value within a portfolio company. This comes down to putting the right information in front of the right person to take the right action to drive value.

The future of digital value creation

High inflation, escalating interest rates, and conflict in Europe have dramatically impacted the private equity industry. Instead of growth at all costs and rapidly rising valuations, there is a renewed focus on identifying and capturing value to drive profitable growth and realize the expected returns on existing investments. Digital solutions are moving to the forefront for value creation strategies. The problem is that even the largest private equity sponsors are still “de-mystifying” where to start and which digital levers to pull.

Cybersecurity

Cybersecurity threats are growing in sophistication and impact, and companies must contend with the risk of their operations coming to a halt in addition to data breaches. This must be a pre-integration priority, leaving plenty for private equity firms to juggle while also focusing on operations and revenue generation. Private equity firms must mitigate the risk of uncovering cybersecurity issues after a deal has closed while also contending with the impact a cyberattack can have on customer trust and loyalty.