Urs Haeusler, CEO, DealMarket.
Private equity investors in the US and Europe are increasingly targeting so-called emerging markets in search of returns that outperform fixed income investments and the public markets.
Large institutional investors, as well as small and mid-sized VC, PE firms and Family Offices are beginning to make more and more direct investments in companies and co-investing in deals with private equity fund managers around the world.
At the same time, the universe of investors is expanding. Recent industry research indicates that investors based in Asia and other regions of the world (non-US and non-European) have begun to allocate more money to private equity and they are seeking investments locally, but also beyond their borders into the US, South East Asia, and Europe.
What is not obvious is that when investors go international it presents some serious challenges to the current way of doing business. Everyday tasks, like sourcing and screening deals, due diligence, valuation, negotiating and contracting become more challenging and complex.
Getting access to the best market information, as well as finding local advisors and partners, become essential elements to succeed. And because the private equity industry is increasingly competitive, it all has to be done thoroughly, quickly and efficiently, while keeping transaction costs down.
One way to adapt to the changes underway is to use more online tools and services, just as other industries have done.
Clearly, investing in companies and buyout funds is not like procuring auto parts or photocopiers for an insurance company’s branch offices, but a lot of the pre-investment and post-investment tasks can be expedited with online services.
In fact, private equity professionals are not exactly laggards in the use of internet-services. For example, virtual data rooms (VDR) are well established, reportedly almost 80% of all North America-based M&A deals use VDRs, and they are catching on in Europe and Asia too.
Besides VDRs, a host of other online services are winning over users, such as transaction databases, online background and credit checks, as well as market research databases. However, they are typically run inside vertical silos and are priced accordingly.
Urs Haeusler is CEO of DealMarket, an online platform for private equity buyers, sellers and advisors.