2023 Private Equity Outlook: Mid-Year Update

Our annual Private Equity Outlook—published in December 2022—discussed the key trends we expected to define the upcoming year; as we enter 2023’s second half, here’s an update on those topics. 

Data-driven digital value creation

Deal flow has been slow to pick up in 2023—and most private equity firms are focusing on value creation across their portfolio because of it. Each dollar needs to be spent wisely, and the bar for conviction is dramatically increasing.

Mid-year recommendations:

• Identify and prioritize use cases based on value and feasibility: This should be done before investing significant resources. When evaluating feasibility, organizations should not only factor in data considerations but also organizational impact and readiness for new solutions and enhanced workflows.
• Lean into targeted solutions: Upgrading and/or replacing core systems can be slow, risky, and expensive. Look instead for more tactical solutions that solve specific business problems rather than reworking entire applications.
• Prototype solutions as quickly as possible: When it comes to demonstrating value, it will always be more impactful to show stakeholders how an enhancement will be used by the organization rather than just describing it.
• Pursue digital investments: Digital investments are proven to drive higher EBITDA. Pivot from high-cost, high-risk efforts and instead focus on quick-win use cases.

Cybersecurity

There’s been an incremental rise in cases of business email compromise (BEC) scams, a type of phishing attack that aims to get employees of a company to send money or divulge sensitive company information to a bad actor. 

Mid-year recommendations:

• Restrict geographic access to your systems: There have been reports of companies being compromised from overseas locations despite only doing business in the United States.
• Revisit which roles in your organization need admin privileges: Rather than basing admin privileges on job level, admin privileges should be granted to individuals based on job function. Determine who actually needs advanced access—and limit all other employees.
• Ensure employee training is implemented (and continuous): Employees should be trained to not open attachments or click on links from unexpected or unverified senders, and all requests should be verbally verified if they look suspicious.
• Fully grasp the cybersecurity imperative: Though most take cyber threats seriously, private equity firms must recognize the urgency of addressing cyber threats—the FBI's 2022 Internet Crime Report revealed more than $83 million in losses due to BEC attacks that year.