What is Business Intelligence in Private Equity?

By: Michelle Wu

Head of Marketing
March 12, 2024

Using business intelligence (BI) tools, private equity firms looking to make reliable investment decisions can do so, especially when attempting to garner insights from large, complex datasets. 

Most companies that use BI rely on internal or external data to make critical business decisions. However, this data must be organized in an easily reportable, analyzable, and digestible format to support decision-making. Put simply, business intelligence is invaluable when making data-driven decisions in the private equity and investment world.

So, what is business intelligence in private equity, how does it work, and what are its benefits? 

Defining business intelligence: A primer

Business intelligence refers to a set of tools for collecting, storing, and analyzing a company’s business information to help that company make data-driven decisions.

For an average business that collects data from disparate units or functions (e.g., sales, operations, IT, marketing, etc), there’s so much information to analyze before arriving at real insights that can drive critical decisions. BI tools speed up this process, enabling business leaders and executives to have increased confidence in their decisions.

Often, a company may be unaware of the impact of strategic decisions until business data is analyzed, reported, and visualized via dashboards, enabling stakeholders to re-evaluate existing strategies or develop new ones altogether.

The applications of BI are similar across most industries, including the investment world. Private equity business intelligence software helps fund managers streamline processes for data analysis, reporting, and visualization, which then fast-tracks investment decisions.

How does business intelligence work?

As a company gathers information from various business units, it’s challenging for stakeholders to determine which data will be useful for making decisions in the short- or long-term. 

Without gaining the right insights from data to drive decisions, a company could be operating blindly—even when it’s already collecting these datasets. For instance, a company may collect data from each stage of its deal sourcing funnel to determine which strategies work best when prospecting new opportunities. 

But how can this company leverage this data to drive growth?

Business intelligence comes in to help teams analyze, report, and visualize all the data collected across the funnel. Then, decision-makers on these teams can evaluate data such as the differences in opportunity size to more accurately determine better-performing processes.

When it comes to private equity business intelligence, firms looking to expand their asset portfolios can use these tools to track business outcomes, portfolio growth, deal sourcing, and other crucial key performance indicators (KPIs) that drive expansion. 

The benefits of business intelligence

Organizations that implement business intelligence in their decision-making benefit from:

  • Higher decision confidence – Since BI tools primarily provide insights derived from existing data, decision-makers can confidently chart a way forward knowing there’s data to back their decisions. With robust BI capabilities that have much shorter turnarounds for data reporting, managers and executives can swiftly make decisions even when pressed for time in a fast-paced business environment.
  • Competitive advantage – Not every organization in an industry uses BI to make high-impact decisions, meaning the organizations that use these tools effectively can compete favorably if they have the latest industry insights. In an industry like private equity where market conditions are constantly evolving, it pays to make decisions driven by the latest market data, especially if it’s curated and analyzed by BI.
  • Greater efficiency – The more data an organization gathers about its operations, the less likely it is to operate blindly, especially if the right BI tools are in place to identify operational gaps. If any existing inefficiencies are left unaddressed, they could compound, creating additional inefficiencies that could otherwise be mitigated by employing a BI strategy.
  • Data governance – When data is organized for BI applications, it’s much easier to implement a data governance framework to standardize how these data are managed across the organization. Increased data governance means data can be trusted as it’s shared between stakeholders in a company.

Combined, these benefits drive reliable decision-making and improve an organization’s long-term performance. In private equity, leveraging business intelligence solutions to make decisions can differentiate one firm from another because processes such as identifying potential investments, sourcing deals, managing asset portfolios, and nurturing investor relationships are driven by data-backed insights and not mere speculation.

How to create a business intelligence strategy 

Although business intelligence strategies might differ from one organization to another, they typically involve:

  • Planning – It all starts with creating a plan for the BI strategy, which may involve identifying measurable outcomes and laying out a path to achieving them. Activities such as determining stakeholder roles and responsibilities, narrowing down data sources for BI, or drafting oversight processes will likely be involved in BI planning.
  • Data selection – With a plan set in motion, it’s important to choose the right data for BI tools to work with. As the saying goes, “garbage in, garbage out,” carefully selecting data sources to drive business intelligence will determine the overall quality of insights an organization receives from these tools.
  • Tools – Likewise, selecting business intelligence tools requires an understanding of their applications and potential benefits to the BI strategy. In principle, an effective BI strategy will depend on a combination of good-quality data being fed into robust tools, which then improves data analysis and reporting.
  • Monitoring – As information is gathered across an organization and fed into the BI infrastructure, decision-makers and other stakeholders can monitor insights as they are reported. BI monitoring is easier with dashboards and other types of visual representations that help users arrive at decision points quickly.

Business intelligence tools

So, what are some of the common business intelligence tools on the market? Between traditional less automated tools and modern highly automated ones, BI tools include:

  • Spreadsheets – Software tools like Microsoft Excel and Google Docs are commonly used to conduct business intelligence, especially for organizations with much smaller budgets or those whose BI needs are not too complex. The drawback of using spreadsheets is that they are prone to input errors and version inaccuracies when shared across multiple users in a business environment.
  • Reporting tools – A step up from spreadsheet tools would be software with reporting, organizing, filtering, and displaying functions to enable users to wade through the complexity of large datasets. Unlike spreadsheets which are often used by multiple business units to perform day-to-day functions, reporting tools tend to be more useful for specific business functions, such as accounting or analytics.
  • Data visualization tools – Just as with reporting software, organizations can use data visualization capabilities to display complex data in simpler, more meaningful ways that enable decision-makers to garner insights and make fast, effective decisions.
  • Data mining tools – With techniques like artificial intelligence (AI) and machine learning (ML), organizations can now mine or analyze large complex datasets to identify specific insights that may be buried in these data. For instance, certain trends might be more difficult to capture using spreadsheets whereas data mining tools can create associations that indicate the presence of these trends.

The future role of business intelligence

As BI continues to grow, there are many ways organizations can use it to optimize their existing practices, scale quickly, or achieve their desired efficiencies. With tools like process modeling, businesses can actually stay ahead of industry trends and differentiate themselves from their competition.

As AI becomes rampant, businesses will most likely leverage BI to drive customer acquisition, using machine learning tools to customize marketing processes and reach customers more effectively. For organizations that depend on the supply chain, BI will help predict logistical bottlenecks so these companies can minimize delays or plan for them.

On the analytics side, companies will most likely be able to process larger amounts of data faster when using business intelligence. For private equity firms and investors, such analytics capabilities could increase the efficiency of complex processes like deal sourcing, transaction monitoring, or relationship management. 

Allvue Systems’ approach to business intelligence

Private equity firms can use business intelligence to improve their decision-making processes, quickly visualize complex data, and identify crucial patterns that may be hidden in the vast amounts of data they gather. Deploying a BI-driven strategy can significantly improve decision-making efficiency for any fund manager.

Whether you’re looking to chart a clear path to successful private equity deals, improve access to critical information, or expand the firm’s business to new investments, it’s important to invest in robust, purpose-built business intelligence software tools like Allvue’s.

Request a demo to learn more about Allvue’s private equity business intelligence software.



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More About The Author

Michelle Wu

Head of Marketing

Michelle is a dynamic marketing leader with 15+ years of experience in capital markets, fintech, and cybersecurity technology industries. Prior to joining Allvue, Michelle was the Vice President of Product Marketing at SecurityScorecard, a global leader in cybersecurity ratings, and was the Head of Security & Compliance Marketing at Box. Before moving into cybersecurity, she led the Banking & Securities GTM strategy at Intralinks and covered capital markets clients at HSBC. She holds an MSc in Media & Communications from the London School of Economics and a BS in Marketing & Finance from NYU Stern School of Business. 

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