What happened?
Private capital markets investment analytics & data solution CEPRES has joined forces with private equity advisory firm Bain & Company to provide DealEdge, a powerful, intuitive digital advisory product that gives private equity investors unprecedented insight into which deals have the most potential and where hidden opportunities exist to create value. DealEdge will leverage Bain & Company’s due diligence consulting expertise applied to CEPRES’ extensive private equity transaction data. Its simple dashboard interface puts detailed investment analysis based on tens of thousands of buyout, growth and infrastructure transactions at investors’ fingertips.
Private Markets Data
Before we dive into the new DealEdge product, humor us while we take you on a whirlwind tour of private markets data.
The deeper you go into private markets, the harder it is to find accurate data. As the amount of accurate data as a proportion of all data decreases, any analysis based on the dataset is more likely to become skewed and subject to survivorship or reporting bias, therefore becoming less reliable and meaningful.
Here’s what we mean:
Private equity firm data isn’t necessarily easy to maintain, but market data providers are able to capture basic information for the vast majority of institutional PE firms via websites, regulatory filings, press releases and Freedom of Information Act requests via pension funds.
Fund and firm AUM data is a little tougher to get; not all firms will state this on their website, but most do and it’s possible to gather this for the majority of firms (and vast majority in terms of capital).
Fund performance data is the first area where details really start to drop off. It’s extremely rare for firms to state ongoing performance publicly. Although voluntary reporting to market data providers continues to increase, most market databases still rely heavily on public pension plans to source this data. Benchmarks associated with these performance numbers, while still meaningful and reliable, are often based on different methods and inclusions or exclusions between providers. Delays in reporting are also common.
Move down another level and meaningful financials around single deals is basically impossible to source. At best, a small minority of deals will be announced with deal values, but underlying metrics to really make sense of things is incredibly rare to see. Unlike fund level data, deal level data is usually exempted from FOIA requests due to its commercial sensitivity, so there is no alternative source. One secure and non-identifiable way to solve this conundrum is to access the data via aggregation.
Aggregated Data
Investors in funds have access to both fund and deal level financials, and so the platforms which exist to help monitor portfolios store enormous amounts of this intelligence. However, they are not the owners of this data, and have no right to repurpose it in transparent form. Aggregated data is a different story altogether…
Monitoring platforms of a certain size have leveraged their wide market reach to aggregate data and produce platforms designed to show benchmarks and analytics (typically on a fund performance level) which are both accurate and updated more quickly than market data providers as they are accessing the primary source of the data.
Aggregating data brings its own challenges – the underlying relational data and classification structure must be designed effectively to avoid duplication and facilitate accurate analysis. Permission must be sought from the owners of the raw data. There must be enough data to produce granular benchmarks, but the platform must also restrict users’ ability to slice and dice to the point where the identity of individual entities (funds or deals) can be discerned.
DealEdge by CEPRES and Bain & Company
All of that brings us to the product in question and allows us to understand the value in the underlying data set. The sheer volume of both LP and GP participants interacting and sharing detailed, aggregated & fully anonymized data via the CEPRES platform creates a significant competitive advantage in terms of the breadth and depth of coverage – especially at the deal level.
CEPRES, in partnership with Bain & Company, has leveraged this position and utilized Bain’s experience and expertise to productize this data and provide a compelling and unique source of aggregated deal-level metrics with a number of valuable use-cases.
DealEdge Product Demo: First Impressions
This is a market intelligence product with no real implementation considerations. Users should be up and running immediately after gaining access. Given the intuitive layout and workflows of the product, we suspect most users will not require much in the way of training and support to capture value from their subscription.
The product is designed to show the range of returns and key financial metrics for private market deals. It’s possible to split the database by geography, industry, sub-industry and vintage year in order to understand how various sectors have performed over time.
Users can compare between sectors or evaluate the range of returns within individual sectors as a way to better understand risk profiles.
In order to ensure the anonymity of underlying data, the platform will not return analysis results in any cases where less than ten deals and across three separate GPs are present. During our demo, we were able to slice and dice by geography, sector and size without hitting these limits. That said, very niche sub-sectors may be off-limits and the likelihood of available analytics for deals outside of Europe and North America will likely be significantly lower.
The product itself utilizes a clean, simple interface with powerful, attractive analytics. We found it to be very intuitive and easy to use. All the expected functionality and exporting abilities are present. As the team gathers feedback from users we might expect to see more customization options and additional analytics given the depth of the underlying data.
Larger private equity firms and GPs with a broad industry focus in particular will gain a lot of value from the platform when assessing opportunities or evaluating existing portfolio investments. There are a lot of other potential use cases for the product too: IR teams could use it to prepare marketing materials or as part of ongoing performance commentary… Firms engaging in secondary buyouts will appreciate the ability to gain deeper insight into the prior owner’s relative success…
We see the product being used alongside a transparent market database to provide additional insight, and so integration with commonly used platforms would be a welcome feature in future – for example, the ability to bring up benchmark performance metrics when examining a specific deal. Similarly, benchmark metrics would certainly enhance a deal team’s ability to understand performance of portfolio companies relative to the market, and therefore integration with traditional portfolio monitoring platforms (such as the underlying CEPRES Platform in this case) are also welcome.
As it currently stands, the product delivers valuable and unique data via a modern intuitive platform. We would certainly recommend that GPs serious about utilizing aggregated market data as part of their decision-making, monitoring and reporting processes evaluate this new tool.
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