Private Equity Market Research


Private equity market research is an essential component in the arsenal of savvy investors looking to outperform the market and achieve their financial aspirations. By engaging in comprehensive research, private equity professionals can decode the complexities of market trends, competitive dynamics, and investment potential. This facilitates a more granular approach to investment strategies, ensuring that every move is backed by data-driven insights and industry acumen.

What Is Private Equity Market Research?

Private equity market research involves scrutinizing industries, evaluating company performance, and understanding consumer behavior to provide private equity firms with the actionable intelligence needed to make informed decisions. Each study is crafted to meet the unique requirements of private equity clients who seek insights beyond surface-level data. The depth of analysis in private equity market research is rigorous, often incorporating advanced financial modeling, due diligence investigations, and market forecasting.

Importance of Private Equity Market Research

Private equity market research equips investors with a panoramic view of the market landscape, enabling them to identify both risks and rewards. It provides a deep dive into industry cycles, regulatory changes, and technological advancements, all of which can drastically influence investment outcomes.

Moreover, private equity market research fosters strategic thinking by revealing insights into customer sentiment, brand strength, and competitive positioning. In any case, this research has multiple benefits for businesses, including:

• Strategic Positioning: Private equity market research helps firms position themselves strategically within the market. By understanding the competitive environment, firms can craft strategies that leverage their strengths and protect against industry headwinds.

• Enhanced Due Diligence: Rigorous market research underpins the due diligence process, offering a granular analysis of target companies. This includes financial health assessments, management team evaluations, and scrutiny of operational effectiveness, which collectively inform the viability of an acquisition.

• Market Trend Analysis: Staying ahead of market trends is crucial, and private equity market research provides the foresight needed to anticipate shifts in consumer behavior, regulatory changes, and technological advancements, ensuring that investments remain relevant and profitable.

• Operational Improvement: The insights gained from ongoing market research can guide operational improvements within portfolio companies. Identifying areas for cost reduction, revenue enhancement, and overall performance optimization is a direct benefit of sustained market research efforts.

• Exit Strategy Formulation: Private equity market research plays a significant role in shaping exit strategies. Understanding market conditions and the potential buyer landscape allows for timing exits to maximize returns and ensure a smooth transition.

Who Uses Private Equity Market Research?

The utilization of private equity market research is widespread, cutting across different actors within the financial ecosystem, each harnessing its insights to serve varied yet critical functions. 

• Private equity firms stand at the forefront of those who use private equity market research. They rely on it to unearth hidden gems in the market, conduct thorough due diligence, and continuously monitor the performance of their portfolio companies. 

• Portfolio companies are consumers of private equity market research. Armed with insights into their competitive environment, consumer trends, and potential growth areas, these companies can make strategic decisions to drive business expansion and operational efficiency. 

• Investment banks and advisory firms use private equity market research to advise their clients accurately. Whether it’s assisting with mergers and acquisitions, capital raising, or restructuring, the insights from market research ensure that advice is grounded in reality and tailored to the current market dynamics.

Lastly, service providers, such as law firms, accounting firms, and consultants, utilize private equity market research to better serve their private equity clients. Understanding the market helps them provide more relevant advice, structure better deals, and navigate regulatory landscapes effectively.

How Is Private Equity Market Research Conducted?

The journey of conducting private equity market research typically begins with defining the scope and objectives of the study. This stage is crucial as it sets the direction for the research and ensures that the efforts are aligned with the specific needs of the private equity firm or its stakeholders. 

• Primary research is a key component, involving direct engagement with industry experts, competitors, customers – and sometimes even the target company’s management team. Tools such as surveys, interviews, and focus groups are utilized to gather firsthand insights that provide clarity on market sentiments and operational realities.

• Secondary research complements these efforts, drawing on existing data from a range of sources like industry reports, financial statements, news articles, and market databases. This helps in constructing a macro-level view of the industry landscape, regulatory environment, and competitive dynamics.

• Market forecasting and scenario analysis are also integral to private equity market research. By projecting future market trends and examining potential outcomes under various scenarios, researchers can advise on the strategic direction and prepare for contingencies.

Lastly, due diligence is conducted to ensure there are no hidden pitfalls or overlooked opportunities. This involves legal reviews, background checks, and deep dives into every aspect of the target company’s operations.

Private Equity Market Research Vs Traditional Market Research

Traditional market research is typically focused on understanding consumer behaviors, preferences, and trends. It is often used by companies to inform product development, marketing strategies, and sales initiatives. On the other hand, private equity market research: aims to inform investment decisions. The focus extends beyond consumer insights to include a comprehensive analysis of financial performance, industry dynamics, competitive landscapes, and potential for growth and value creation within companies.

This is generally more in-depth, with a narrower focus tailored to the specific interests of investors. It requires a granular assessment of a target company and the market it operates in, often including bespoke financial models and forecasts.

Main Players in the Private Equity Market

The private equity market is a dynamic and multifaceted arena where numerous players vie for lucrative investment opportunities. From firms that specialize in leveraging companies for growth to those that focus on turning around underperforming businesses, the private equity ecosystem is diverse and robust.

  • Blackstone Group: As one of the world’s leading investment firms, Blackstone boasts a vast portfolio across various asset classes. With a reputation for savvy deals and strong returns, Blackstone is a heavyweight in private equity, real estate, hedge fund solutions, and credit.
  • The Carlyle Group: With a broad range of funds and an appetite for diversified investments, The Carlyle Group is recognized for its deep industry expertise and commitment to corporate citizenship. 
  • Bain Capital: Bain Capital has built its reputation on a consultative approach to investments, emphasizing value addition and long-term growth. It operates across various areas, including private equity, venture capital, credit, public equity, and real estate.
  • Apollo Global Management: Apollo is known for its contrarian approach, focusing on distressed assets and companies in need of operational turnaround. It employs a patient, value-oriented investment philosophy and has expanded its portfolio to include alternative asset management.

Opportunities in the Private Equity Market

The private equity market offers a plethora of opportunities for investors seeking to diversify their portfolios and tap into the potential for high returns – and here are some of the compelling opportunities within the private equity market that are capturing the attention of savvy investors:

• Emerging Markets Expansion: Emerging markets present an array of opportunities for private equity investors willing to navigate the risks. These markets often offer high-growth potential due to favorable demographics, increasing consumer spending power, and ongoing economic development.

• Distressed Assets and Turnaround Situations: Economic downturns and industry disruptions create opportunities for private equity firms to acquire distressed assets at discounted prices. Firms specializing in operational turnarounds can extract significant value by restructuring and reviving these companies.

• Consumer Goods and E-Commerce: The shift in consumer habits toward online shopping and preference for niche brands has opened up new investment opportunities in the consumer goods sector and e-commerce platforms, which private equity can leverage.

• Secondary Market Transactions: The secondary private equity market provides opportunities for investors to gain liquidity and for buyers to access existing private equity interests at potentially lower entry points or different stages of the investment cycle.

• Co-Investments and Joint Ventures: Co-investments with other private equity firms or strategic partners enable the sharing of expertise, resources, and risks, creating synergistic opportunities to tackle larger, more complex deals.

The Future of Private Equity

The private equity industry’s fantastic recovery since the financial crisis was remarkable. The industry has grown – and continues to grow – at a furious pace. It was on the ropes only a decade ago. Industry experts expect continued growth over the next decade. They also predict that wealthy individuals will generate considerable demand for private equity.

At present, private equity firms do the biggest deals in the US. The US is also their most significant source of capital. More capital is invested in the US than in any other part of the world. Industry players expect that private equity investment will become much more balanced. Emerging and developed economies will share the pie. They also predict that private equity firms will merge operations. The larger firms will buy out the smaller, independent ones.

What Makes An Attractive Private Equity Target?

The following factors generally make a strong Private Equity target.

  • Strong Free Cash Flow (FCF) Generation
  • Limited Free Cash Flow (FCF) cyclicality
  • Leading and defensible market positions
  • Limited outside threats
  • Growth opportunities
  • Efficiency enhancement opportunities
  • Low Capital Expenditure requirements and Net Working Capital requirements
  • Strong Asset base
  • Proven management team that can stay on and perform
  • Clean Balance Sheet
  • Potential for immediate asset sales
  • Ability to operate the business more effectively without public scrutiny
  • Viable exit strategy
  • Reasonable acquisition price

Why Private Equity Market Research is Important

Information is by far the most valuable asset in financial markets. Market Research is essential because investors rely on the information gleaned. This information helps them decide on investments. Traders need data to know whether they should do a deal. Corporate financiers need information to value companies and take part in transactions. 

PE Professionals tend to prefer to use as little of their own money as possible and generate the highest return on the money they invest.

Two common challenges and opportunities for PE firms are:

  1. Finding the best companies to LBO
  2. Finding ways to create value in the companies they buy

We provide expert and Key Opinion Leader interviews to help PE professionals with both deal sourcing and improving the companies they buy.

Some private equity firms use a team of analysts to do their market research. Others outsource this task to streamline their operations. As long as the PE firm can ensure the quality of its information, outsourcing can be beneficial.

About SIS FinTech Research and Consulting

SIS FinTech Research and Consulting provides Insights, Data, Strategies and Corporate Intelligence to capture new opportunities.  We provide:

  • Focus Groups
  • Industry Tracking
  • Market Intelligence
  • Opportunity Identification and Analysis
  • Product Testing
  • In-Store Research
  • B2B Executive Interviews
  • Statistical Analysis
  • Data Collection