Private equity is still relatively new to big data, but the founders of San Francisco-based Two Six Capital, a firm that specializes in data science for due diligence and value creation, think widespread adoption is only a matter of time.
Co-founder Ian Picache compares how quantitative science transformed Wall Street just decades earlier.
“It is like it was in 1990 for public markets," Picache said in an interview with Mergers & Acquisitions. "The use of big data techniques is nascent. It is only a matter of time before the private industry is disrupted.”
Oak Hill Capital Partners, a private equity company located in Texas, tapped Two Six Capital’s services to analyze customer segments for a regional broadband fiber company in its portfolio. After their data analysis led to successful repricing and revenue growth, Oak Hill sold the company for $2.365 billion in 2017.
“Statistical, artificial intelligence, and machine learning techniques are becoming available and take advantage of the technology infrastructure and availability of data.”
Huge leaps in computing power, the existence of cloud computing, and negligible costs of data have contributed to the growth in data science. Not to mention, consumers generate staggering amounts of data everyday and technology has stepped up to meet the challenges of data analysis.
The methods to analyze data have also evolved significantly.
“Statistical, artificial intelligence and machine learning techniques are becoming available and take advantage of the technology infrastructure and availability of data," Sajjad Jaffer, co-founder of Two Six Capital, told the magazine.
Picache and Jaffer, both Wharton MBA holders, founded Two Six Capital in 2013 with the aim of using technology to help private equity firms derive data-backed, actionable insights from their portfolios. More than $100 billion worth of granular transaction-level revenue data analyzed and $27 billion in completed PE transactions later, the firm has found great success as an advisor and co-investor to industry leaders in private equity.