"Although we're seeing more mid-market PE houses becoming comfortable looking at software firms and perhaps also with the valuation logic and route to an exit, it's not all hoodies and teenage founders. Industrial maintenance, Wealth Management (see below), telematics and marketing agencies also feature high on the diligence radar as dry power seeks a home."
Theme #1
Tech due diligence ramps up – and long may it continue!
In May, we kicked off as many diligence assignments as we did in Q4 2020 - reflecting a pick-up in transaction volumes – with April and May seeing c.300 PE deals across a wide range of sectors.
Recently, I discussed with a US client that only 18 months ago, I was explaining what digital due diligence was. Now I'm only ever talking about how we deliver it and when.
For the first time in May, we had a higher concentration of diligence engagements on technology businesses (instead of on the technology in play or available to traditional B2B, healthcare, Financial Services and other trending sector firms).
Although we're seeing more mid-market PE houses becoming comfortable looking at software firms and perhaps also with the valuation logic and route to an exit, it's not all hoodies and teenage founders. Industrial maintenance, Wealth Management (see below), telematics and marketing agencies also feature high on the diligence radar as dry power seeks a home.
Theme #2
Deals in Wealth and Asset Management
Wealth Managers, IFAs, and advisory businesses probably win the award for the most mentioned 'things we're looking at' this month. And that's been true across our Diligence, Digital Strategy and Digital Transformation services.
Our strategy team recently proposed (and went on to deliver) an innovative personalisation and content-driven strategy to ease a Wealth Manager's customer acquisition to onboarding journey. The focussed project took a few months to deliver, and the client is now benefiting from increased conversion without adding client service overhead.
Theme #3
Coming Soon - Wealth Management research paper
Look out for our Wealth Management paper, which will be published in June, covering the best opportunities for players in the space to leverage technology and enable growth, automation and operating efficiency.
In 'platforms' it's all about scalability
Theme 4
Scalability was the key trend in the engagements we've taken on for investors in tech, SaaS and platform plays. We think about scalability in three dimensions:
Is the technology future-proof?
1
Has software been written, and tech infrastructure chosen, to dynamically expand as volume grows? Are onboarding and support journeys automated with maximum self-service to avoid hidden overhead burdens? Does the team have the capacity and discipline to maintain forward momentum?
Is it ready to go global?
2
Does the platform have the potential to enter adjacent markets and/or internationalise? Have the technology and infrastructure choices embedded optionality, or do the team need to refactor the software and re-platform the technology before diversifying?
Is it agile?
3
Is there potential to leverage the underlying technology into 2nd and subsequent use cases? How much effort is involved in moving from an on-prem solution in one market to a cloud-deployed solution for another?
Theme #5
In 'services' it's all about differentiation and engagement
Differentiation through digitisation has been an actual theme this month, and we've been busy helping more 'traditional' businesses to understand, imagine and implement the technology that supports their VCPs.
There's value in leveraging technology to step out of the crowd, and here's how we're assisting:
- We developed a game-changing digital strategy for a utility business that needs to step out of the race to the bottom of a commoditised market - moving to a frictionless customer experience that allows them to open up more customers across the UK.
- We've designed a content strategy and platform to help a healthcare business engage patients before they have an acute need for the service, raise the net further up the funnel, and reach more customers than ever before.
Simply 'being online', offering a client portal or an e-commerce shop isn't a differentiator anymore. Instead, personalising content, removing friction and harnessing data to improve the user experience are real differentiators.
We'd be more than happy to discuss the challenges and pain points some of your portfolio companies might be having. We're already working with Silverfleet, Cairngorm Capital, Gresham House, Velocity Capital Advisors, Arete, Par Equity, Pollen Street Capital, Jeffries, EMK, KSL and more.