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Published by: Ramy Sahadevan
Published on:

The Importance of ‘People Data’ in Private Equity

Published by: Ramy Sahadevan
Published on:
People data is the collection and analysis of individuals within organizations, including key executives, management teams, and industry experts.

Strategic decisions are essential, and the more information, the better. While not necessarily new, a powerful tool has emerged on the scene—people data. People data platforms are filling a transformative role in the Private Equity landscape through unparalleled tracking and the easy outsourcing of the data collection process.    

People data is the collection and analysis of individuals within organizations, including key executives, management teams, and industry experts.

Connections and insights reign supreme. Harnessing the power of individuals and their networks has become a game-changer for success. Here’s how People Data is enabling smarter, faster, and more informed decision-making processes while saving organizations resources.    

People Data: A Game-Changer in Private Equity

In the world of private equity, information is currency. The rise of people data represents a shift in how deals are sourced, evaluated, and managed. People data is the collection and analysis of individuals within organizations, including key executives, management teams, and industry experts. With more advanced technology and data analytics, private equity firms now have unprecedented access to this wealth of information, and when utilized well, potentially an edge.

Defining People Data and Its Scope

People data goes beyond the traditional financial metrics and balance sheets that have long been the focus of private equity due diligence. Everyone has access to that. Instead, it delves into the intricacies of individuals—their backgrounds, professional experiences, networks, and connections.

It’s about understanding not just what a company has done but who is driving its success. Organizations don’t exist without the people within them. Understanding exactly what a company is at its core isn’t possible without looking at its people. People data enables a level of discernment that a simple balance sheet can’t give you.

Technological Advancements and Data Analytics

The data has always been around, but until recently, it was difficult to accumulate and realize. More recently, powerful tools have empowered private equity firms to harness the full potential of people data. Advanced analytics tools can parse through vast datasets, extracting valuable insights that were previously hard to find. This means that private equity professionals can make more informed decisions about potential investments, assess risks more effectively, and ultimately, enhance the performance of their portfolio companies.

Leveraging People Data for Success

The ways that people data can impact PE can be nearly endless, but there are a few key pillars that can be leveraged to great success: deal sourcing and evaluation, due diligence, post-acquisition value creation, and enhanced CRM system integration. Let’s see how people data supports these processes and workflows.

Deal Sourcing and Evaluation

When identifying potential investment targets, private equity firms can use people data to gain insights into the capabilities, track records, and networks of key individuals within a target company.

This information can help assess the potential of a deal (in tandem with financial information), helping firms make informed investment decisions. By understanding the people behind the numbers, private equity professionals can identify opportunities that might otherwise be overlooked. Metrics like connections, individual backgrounds, and expertise can help firms invest differently, and potentially more intelligently. At the intersection of relational intel (people data) and financial due diligence, investment opportunities await.

Mitigating Risks and Validating Assumptions

Proper due diligence is so much more than just financial assessments, and people data has its place in the process. Most often, firms use it to look at the backgrounds, reputations, and performance of certain individuals within organizations. People direct companies and understanding the risks and achievements of those individuals is important. Identifying red flags or validating assumptions is part of a thorough evaluation of the integrity of a management team.

Post-Acquisition Value Creation: Optimizing Leadership and Networks

The utility of people data extends beyond the deal-making phase. Once a private equity firm has acquired a company, people data continues to be invaluable. Value creation in the form of talent assessment and helping firms identify gaps in leadership, and informed decision-making regarding personnel changes are key examples.

Short lists are among the most common (and essential) tools that these people data platforms offer. Instantly creating lists of board members and C-suite individuals according to custom criteria is not only a time saver, but a way to filter people in ways that would be impossible manually. For newly acquired companies where individuals aren’t personally known, these tools can assist in decision-making.

Additionally, these tools can uncover data on individuals that isn’t immediately clear or disclosed. Back channel referencing or forensic referencing, as it’s called, can help in the decision-making process, especially in high-value situations where a lack of information and clarity could mean huge losses.

Even more, understanding the relationships and networks of key individuals can help facilitate strategic introductions, partnerships, and collaborations. These sorts of metrics can be tracked, all the way up to leadership and C-suite levels. People data platforms can act as a “single source of truth” that notifies you of important market moves, transitions, and more.

Ultimately, the value added of people data shows up in personnel, outright growth, and collaboration opportunities. Decision-making doesn’t just become easier, it becomes more informed.

Enhancing CRMs

Well-oiled and truly useful CRM systems can exist. Incorporating people data into these platforms can provide additional data points that make outreach, marketing, and initiatives significantly more accurate, ultimately giving them a higher return. CRM data is only as good as its source, and integrating them seamlessly with people data tools can turn them from a hindrance into something genuinely useful.

Real World Usefulness

Recently, a 2022 BoardEx Report, Insights on Portfolio Company Talent 2022, revealed that private equity firms are increasingly relying on people data to make critical decisions at every stage of the investment process. This case study underscores the significance of these insights, offering a real-world glimpse into the power of people data.

Some of those insights? External hires for CEO and CFO positions within portfolio companies are increasing, with more than two-thirds being recruited externally. This shows a dramatic shift in talent acquisition strategies. Identifying and vetting these external hires with relevant data ensures that they are well-connected and bring valuable expertise to the table.

Furthermore, the report highlights the extensive networks of CEOs and CFOs, most with thousands of direct and indirect connections within the private equity ecosystem. Each connection is an opportunity for entry, collaboration, and potential growth, all things people data can enable.

In the context of private equity operations, People Data is all about the critical ability to monitor and track individuals. This encompasses not only those within their existing portfolio but also individuals with the potential to become part of it, including leadership teams and board members. Altrata provides a game-changing solution by simplifying the process, including outsourcing the collection of data related to all the leadership teams that people are affiliated with.

As the industry continues to evolve, harnessing the power of people data will not only be a competitive edge but also a fundamental strategy for success.

Ramy Sahadevan is a Senior Director and Head of Private Equity Sales at Altrata. He is a trusted advisor to clients seeking to optimize their data and software infrastructure. He has a wealth of experience working with some of the largest private equity firms globally. Ramy also has a proven track record of helping PE firms create greater efficiencies, specifically for their investment, portfolio talent and investor relations teams. His previous experience includes sales roles within many of the leading market data companies, including Intercontinental Exchange. Prior to moving to the data/software business, he worked for Morgan Stanley Wealth Management and Brown Brothers Harriman.