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Four Difficulties PE Firms Will Face In 2022, And Why ERP Software Is The Answer


It’s getting tougher and tougher to win in private equity (PE). On top of the COVID-19 pandemic, PE firms like yours must overcome specific business challenges that have emerged in 2022.

Amongst these challenges are increased competition in the PE space, difficulties in identifying investment opportunities, executing a profitable exit strategy, and conducting proper due diligence before investing in a portfolio company.

All of these are roadblocks to success in private equity. The key to overcoming them, however, is the ability to access accurate real-time data and derive actionable insights from it.

Despite this, many PE firms struggle with data exchange between portfolio companies. So, it can take months for PE firms to acquire the data they need, which is way too long.

However, ERP software can be a solution to the data deficiencies faced by your PE firm. They streamline data acquisition, boost access to real-time data, improve decision-making, identify critical insights, and create a competitive advantage for your business.

Below, we cover the how ERP software can help your PE firm overcome the most likely challenges that will emerge in 2022 and beyond.


1. Difficulty Identifying Investment Opportunities

Investment Opportunities

Gathering accurate information is key for PE firms when it comes to screening investment opportunities for viability. However, it takes a lot of time and effort to do so.

And many PE firms like yours lack the necessary manpower or time to thoroughly scrutinize every opportunity. This often means your business have to make decisions on whether to invest quickly, and not always with enough data.

Without easy access to internal benchmarks and other data from your portfolio companies, it can be hard to make the right investment deals that generates a solid return on investment (ROI) for your PE firm.


2. Difficulty Executing Due Diligence

Due Diligence

Investing in the wrong company can not only result in terrible ROIs for your PE firm, it can even damage the reputation of your business. Take the example of SoftBank, which posted massive losses from failed investments such as WeWork.

To avoid such losses, your PE firm needs to do due diligence to ensure that a prospect is as good an investment as it looks. But gathering the information you need to carry out such due diligence is not easy.

For example, your PE firm needs detailed information on a target company's operations and products or services. They also need to carry out market research to better judge how it’s positioned within their industry, and against their competition.

Unfortunately, many businesses can’t organize and transfer their data quickly enough to provide PE firms like yours with the vital insights into their operations they need. That makes it hard to determine if a potential portfolio company is a good investment.


3. Difficulty Tracking Progress Throughout The Value Creation Process

Tracking Progress

One way PE firms like yours achieve a high ROI on their investments in portfolio companies, is to reorganize them as part of a value creation plan.

However, you need critical insights into the current processes of said portfolio companies to create an effective value creation plan. And many PE firms like yours lack the ability to derive such insights from the data they collected.

Because of this, data-driven analytics are necessary for your PE firm to gain the insights needed to best create value in your portfolio companies.

The lack of an integrated view of their portfolio company's progress over time also makes it hard for PE firms like yours to track the long term progress of your portfolio companies.

That’s because this with your functions compartmentalised into data silos, your PE firm will not get access to critical data at the right time, putting it at risk of missing critical points in the value creation process.


4. Difficulty Managing A Profitable Exit

Profitable Exit

The profitability of your PE firm ultimately lies in how well it manages its exit from a portfolio company at the right time.

To execute a profitable exit, your PE firm needs access to real-time data to perform the necessary valuations, and meet regulatory demands for public disclosure. But this often involves massive costs for your portfolio companies, and increases the time needed before the exit can happen.

However, investing in an ERP software unifies all the data needed for PE firms to begin preparing an exit strategy for a portfolio company.


How ERP Software Helps PE Firms Beat These Challenges

Failing to address the above challenges can prevent PE firms like yours from maximising its investment opportunities. It can also prevent your business from responding quickly to market changes and making fast decisions, which you can’t afford in a competitive environment.

Implementing an ERP software can help your PE firm resolve these issues, by unifying data generated by your portfolio companies to provide you with a single source of truth into your investments.

More specifically, ERP software helps PE firms:

  • Determine the suitable investment targets by providing easy access to data from your existing portfolio companies—information you can use as benchmarks for your screening process.
  • Drive the value creation process, as you’re able to track the progress of your portfolio companies over time and derive insights that reveal opportunities to create value.
  • Generate insights on potential investment targets for carrying out the necessary due diligence.
  • Unifies all the data needed for PE firms to prepare an exit strategy for a portfolio company.

In short, ERP software streamlines data acquisition, provides accurate, high-quality data in real-time, and eliminates errors in data entry while facilitating quick decision-making.


Your PE Firm Can Resolve Any Difficulty With An ERP Software

ERP Software for PE Firm

It’s getting harder and harder for PE firms to win. Overcoming the four difficulties discussed above helps PE firms like yours boost their competitive momentum. But it takes a robust ERP software that can unify real-time data from diverse global operations to beat these roadblocks.

Investing in an ERP software that can scale end-to-end makes it possible for your PE firm to gauge progress towards its cost, growth, and profitability goals.

That, in turn, can help your PE firm win more deals and achieve greater profitability in a hotly contested environment.

Still, implementing an ERP software for your PE firm can be time-consuming. But it can be made easier with the help of an experienced partner like AFON.

If you'd like to know how we can help you with an implementation project, give us a call at +65 6323 0901, or drop us a note and we'll get back to you soon.


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