The Power of Data in Private Equity Due Diligence

February 21, 2019

Imagine ACME Capital, a $1 billion private equity fund with investments in mid-market enterprise software companies. Historically, when evaluating potential LBO deals, ACME’s diligence process tended to be lengthy, manual and focused solely on financials. Partners would spend up to 8 weeks gathering data before reaching an investment decision.

But after adopting Codify AI’s automated data gathering and analytics platform, ACME’s process has become far more efficient and illuminating. Now, the firm can instantly compile and study real-time operational metrics on any company in its deal funnel - everything from product adoption trends to Net Promoter Scores to customer churn heatmaps.

Recently, ACME was considering acquiring Comply, a SaaS provider in the GRC space. Traditionally, partners would have worked for months to piece together Comply’s market share, learn about key customer defections, and estimate TAM across various verticals.

But by tapping into Codify’s dashboard, ACME obtained clear visibility right away. In just a few days, partners gained conviction around Comply’s growth trajectory relative to rivals. Codify also surfaced previously unknown data points about Comply’s expanding enterprise customer base.

Armed with rich, operational insights from Codify AI, ACME was able to shorten Comply’s diligence from a projected 9 weeks to just 2 weeks. Partners credited Codify for one of the fastest investment decisions in the firm’s history - not to mention their highest growth LBO to date.

By automating diligence with alternative data, ACME is doing deals faster, smarter and more strategically than ever before. The firm estimates Codify has already boosted portfolio returns by 2.5x versus the private equity benchmark. As one GP put it, “Codify makes us feel like predictive, rather than reactive, investors."

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