Private Equity (PE) companies are always in search of organizations which can deliver high-return on investments. They also invest in companies in distress and indulge in corporate restructuring. By buying and selling private companies, private equity entities generate revenue for themselves and their clients. A lot of research and analysis is involved in finding the right companies to invest in. Not to forget, a private equity firm also focuses on several non-core functions like HR and customer support. Firms prefer outsourcing Private Equity Services to remove the overhead pressure and boost productivity.
Read on to understand what can be outsourced by private equity companies in 2023.
Outsourcing Services for PE firms
Many reliable third parties offer outsourcing services to private equity companies. Research or knowledge acquisition firms are best at providing support for private equity companies. Via outsourcing, a part of operations is shifted to a third party. Some PE firms might outsource entire departments to third parties for better results. The private equity firm will no longer spend its in-house resources on outsourced processes. Also, internal employees will not have to worry about the already outsourced operations. The outsourcing partner will complete the tasks timely on behalf of the private equity firm. The private equity firm will pay the outsourcing partner in exchange for their services.
Processes Outsourced by PE Firms
Are you looking to outsource some private equity processes? You can outsource a single process or an entire department for increased productivity.
Here are some common functions outsourced by private equity firms around the world.
- Deal Sourcing
The process of discovering and analyzing investment opportunities is termed deal sourcing. Every private equity firm has to indulge in deal sourcing to discover the right investment opportunities. A private equity firm cannot invest in any company it comes across. It spends some time analyzing the finances of the target company before investing. Also, some private equity firms might not have access to different markets. It means they cannot source deals quickly due to less exposure. For the same rationale, PE firms outsource the entire deal-sourcing process to a third party.
An outsourcing partner will indulge in market mapping, target screening, thematic research, and other processes to identify the right investment opportunities. It will also maintain data regarding the participants in the concerned market. It will not leave you after identifying high-return investment opportunities. It will provide support from deal sourcing to deal closing for high returns. Your in-house employees might not have the resources to source deals from different markets. CRM tools are used to identify the right investment opportunities for private equity firms. An outsourcing partner can provide you with the required tools for deal sourcing.
- Portfolio Management
Portfolio management is among the primary private equity services. PE firms are bound to monitor the performance of their investments and address risks. Without monitoring their investments, PE firms can never diversify their portfolio. The portfolio of a PE firm must be aligned with the investment strategy. If investments are not aligned with the organization’s strategy, strategic risks occur and harm business continuity. A reliable outsourcing partner will help you use the right tools and technologies for portfolio management. With new-age portfolio monitoring tools, you can identify the risks in real-time and maximize your returns.
- Exit Process
Sometimes, private equity firms might want to exit their investments. They can do so to preserve their funds to mitigate existing risks. PE firms might require support for liquidating their assets from a third party. Outsourcing companies offering exit support allow PE firms to close deals without loss. The outsourcing company will screen and shortlist potential buyers on behalf of the private equity firm. It will help the PE firm get the best price for liquidating their investments. When you are choosing a firm for private equity services, check for exit support in the future.
- Client Relations
PE firms must communicate with their investors at frequent intervals. Investors must be kept aware of the existing investments, finances, risks, and opportunities. Some investors might demand monthly or weekly reports on the performance of portfolio companies. While fulfilling the demands of investors, PE firms might not focus on core competencies. Luckily, outsourcing firms offering private equity services will maintain relations with clients on your behalf. A reputed outsourcing partner will use digital solutions to keep investors engaged. Investors can be informed with the help of digital platforms in real-time. Additionally, Private Equity (PE) firms can also outsource functions like IT, due diligence, taxation, compliance, fund administration, accounting, and bookkeeping.
In Conclusion
Private equity firms do not have to put themselves under pressure by managing all tasks internally. Instead, they can outsource core and non-core functions for reduced pressure and increased productivity. Search for the right PE outsourcing partner right away!
Must Read: Maximizing Returns through Outsourcing in Private Equity: Best Practices and Strategies