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The Future of Private Equity: Machine Learning Deal Sourcing

Today’s best private equity opportunities wait for no one. One moment they’re here; the next, they’re gone. If you want to compete, you need a way to source faster, more efficiently, and more accurately. But how? Machine learning private equity tools.

Machine learning is a form of artificial intelligence that enables computers to learn from data, identify patterns, and make predictions using algorithms. Machine learning algorithms are constantly improving as they learn from new data.

In the past few years, artificial intelligence and machine learning have exploded and are helping companies and society make more accurate predictive decisions. And the market potential of this new wave of technology is huge: Machine learning-capable markets were valued at $8 billion in 2021 and are expected to rise to $117 billion by 2027.

Private equity firms are also starting to harness the power of machine learning deal sourcing. But if you’re not convinced that the future of private equity rests in AI’s digital hands, let’s take a look at how machine learning is being used in private equity and the benefits of AI-driven private equity trends.

The Growing Role of Machine Learning in Private Equity Technology

As private equity firms look for new ways to source deals, private equity technology, and machine learning are increasingly important.

Machine learning can help private equity firms source and win deals they might have missed simply because of AI’s tremendous reach and learning elements. To harness artificial intelligence deal sourcing’s power, software systems use data in new ways to identify potential investments and help firms quickly assess opportunities.

So how is this an advantage? Machine learning can help firms:

  • Evaluate companies: Machine learning can analyze a company’s capabilities, attributes, market position, customer base, and more to get a comprehensive view of its health and prospects. Private equity firms can use this information to determine if a company is a good investment or not.
  • Source deals: Machine learning deal sourcing tools like udu comb through data to identify companies that fit a private equity firm’s investment criteria. The criteria can range in complexity, from broad (e.g., companies in the healthcare sector) to specific (e.g., companies with a unique type of aerospace manufacturing technology).
  • Close deals faster: In a competitive market, speed can be what seals the deal. Machine learning lets firms quickly assess a deal and make an offer before their competitors.

The Benefits of Machine Learning Deal Sourcing in Private Equity

AI is changing the private equity landscape, but many firms are hesitant to implement new machine learning private equity technologies. A Refinitiv AI/ML Survey found that only 46% of respondents considered using machine learning tech – or found it essential for their future operations.

There are several misconceptions about machine learning and its cost and complexity to implement. The reality is that machine learning is becoming more accessible and affordable as technology advances.

Here are just a few benefits of the future of private equity deal sourcing.

1. Deeper Insights into Privately Held Companies

Machine learning can give private equity firms an edge by providing insights that might otherwise be unavailable during the due diligence phase. AI-powered private equity technology can search thousands of data sources and focus on the results that are most relevant to your firm.

This capability is especially valuable for small and mid-sized firms that don’t have the resources to thoroughly investigate every company they’re interested in.

2. Increased Efficiency in Deal Identification and Sourcing

Sourcing deals is just one part of the overall process – firms still need to evaluate each deal to determine if it’s a good fit. Machine learning can help firms automate the research and analysis process, freeing employees’ time to focus on other aspects of the business.

3. Ever-learning Algorithms

Machine learning algorithms are constantly improving as they learn from new data and feedback. The more a machine learning system is used, the more accurate it becomes. For example, a deal sourcing tool like udu learns what you’re looking for as you continue to use it and works 24/7 to identify, screen, and isolate matches.

With artificial intelligence private equity tools, your firm will be better positioned to stay ahead of private equity trends and find those hidden gems faster.

Key Capabilities of Machine Learning Private Equity Deal-Sourcing Tools

Private equity firms are under pressure to source and win deals quickly. Here are some of machine learning’s capabilities that can give firms a competitive edge.

Data Enrichment

AI can help firms gather information about companies that’s otherwise difficult to obtain, like data about a company’s growth, market data, and customer reviews. Machine learning algorithms can even mine companies that don’t make their data readily available. Plus, AI doesn’t need to sleep, so the systematic scanning of data sources happens 24/7.

Deal Identification

Machine learning can help firms identify companies that fit their investment criteria. The criteria can range in complexity, from broad (e.g., companies in the healthcare sector) to specific (e.g., dental practices in the lower middle market that specialize in cosmetic dentistry).

Algorithmic Analysis

Beyond identifying potential acquisition targets, artificial intelligence deal sourcing also scores and prioritizes them. For example, machine learning can categorize private equity potential based on factors such as size, location, industry, and growth. This lets firms quickly assess a deal and make an offer before their competitors.

Harness the Power of Artificial Intelligence Deal Sourcing With udu

When you harness the power of machine learning private equity technology, you gain a competitive edge that few firms have. But to wield this power effectively, you need a system developed specifically for the private equity industry.

That’s where udu comes in: udu gives private equity firms unique access to machine-learning-derived lists of high-value acquisition targets.

Using the latest advancements in data harvesting, natural language processing, and machine learning, udu systematically scans web-connected data sources to create proprietary data resources perfect for your investment goals.

If you want to get the most out of your investments, schedule a demo of udu today and let the power of machine learning work for you.