Private Equity

September 09, 2021

Efficient Tech Stacks Power Higher Returns for Private Equity Firms

private equity technology

Being flexible and agile is part of doing business for private equity firms — it’s what it takes to be successful. Flexibility is also a crucial aspect of building value from your portfolio companies. An efficient tech stack can help Private Equity (PE) firms drive more value from their acquisitions through greater efficiency, visibility, and scalability. The one component of that tech stack that drives the most direct ROI is a centralized financial management application.

ERP Forms the Center of the Stack

Our colleagues at Plante Moran recently published a terrific article on this very topic. In the article, one of the authors, Craig Zampa, points out that PE firms are increasingly turning to bolt-on acquisitions to grow companies inorganically. Unfortunately, many of these acquisitions rely on outdated private equity technology — specifically, inflexible legacy accounting packages. This adds more pressure to find the operational efficiencies as the legacy applications become roadblocks to efficiency and growth. One of the best ways to improve operational efficiency and higher returns is by implementing a centralized ERP system.

Cut Expenses by Centralizing Tasks

PE firms can cut operational expenses by investing in the tech stacks of their acquisitions — specifically by putting an efficient, modern financial management application in place. These applications can centralize tasks, including payables and procurement leading to greater efficiency and cost savings. These applications also provide automated workflows to reduce manual tasks, support multi-entity accounting complexities, speed consolidations, and detect anomalies in company data. As an additional benefit, updated private equity technology is more secure, reducing the risk of cybersecurity attacks.

Visibility Helps You See Around the Corners

Real-time visibility into operations helps private equity firms invest – and perform – better during uncertain markets. The necessary data-driven analytics are nearly impossible to gather when acquisitions (or private equity firms themselves) rely on disconnected applications and spreadsheets to run operations. With a modern, cloud-based financial management application PE firms can make better investment decisions —for their firms and their clients. Learn more in our article, How Real-Time Visibility Helps Private Equity Firms Invest Better During Uncertain Markets.

With a scalable, centralized financial platform at the center of a best-in-class private equity technology stack, PE firms gain the efficiencies necessary to grow profitably and adapt to changing markets and build short- and long-term value in the companies they invest in. We’ve worked with a number of growing PE firms and would be happy to review your tech stack needs or answer any questions.

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