How private equity giants like Apollo and EQT are using the cloud to improve dealmaking, boost portfolio companies, and tap into AI

  • Private equity has been slow to adopt data science and the cloud.
  • But groundbreaking technologies like generative AI are accelerating the industry’s adoption.
  • Here’s how Apollo and EQT use Google Cloud to improve themselves and their portfolio companies.

As the public cloud becomes more important in how investors view and quantify potential deals, private equity is finally opening up to it.

According to Vikram Mahidhar, data and digital transformation operating partner at the $598 billion money manager Apollo Global Management, technology is becoming an important part of the private equity firms’ value creation strategy.

Among portfolio companies, the cloud represents significant cost savings and efficiency gains; for example, buyout firm THL migrated one of its portfolio companies to the cloud to save 50% on annual IT infrastructure costs. PE firms are collaborating more with cloud providers to understand the savings — and to hold cloud providers accountable for them.

“That’s where partnerships, deep partnerships, matter because we can go to partners and say: I’m going to hold you accountable to this number, and it’s set in stone,” Mahidhar, who leads Apollo’s data, analytics, and digital team, said last Wednesday on a panel at Google Cloud Next.

PE firms benefit from having their data — as well as the data of their portfolio companies — in one place to gain better business insights and identify opportunities. Creating a company’s cloud presence and organizing its data is also a critical first step in unlocking new forms of artificial intelligence.

“Technology is becoming even more important across all business functions,” said Carl-Magnus Hallberg, managing director of digital experience at EQT, during the panel discussion. “The alternative sets us back in time.”

Using cloud to improve portfolio companies and investment firms themselves

Apollo’s Mahidhar is focused on increasing employee productivity through the use of the cloud and artificial intelligence.

“How do we make our own analysts far more efficient in looking at trends and analyzing lots and lots of data monitoring the industry,” Mahidhar asked.

Apollo is currently in an intense experimentation phase in which the company is putting “as many use cases as possible in the hopper,” he said. And the pilots that go into production will deliver productivity with a clear vision of how to do it.

“Our primary focus is on value creation.” “Euphoria does not captivate us,” Mahidhar explained.

KKR is another private equity firm that has turned to the cloud to boost worker productivity, from using AI to assist deal teams in sorting through data when researching potential investments to automating manual processes for software developers.

Adaire Fox-Martin, president of Google Cloud Go to Market, said on the panel that Google Cloud’s Office of the CTO, a task force of engineering executives dedicated to solving customers’ toughest tech challenges, is currently working on a solution to speed up investment firms’ due diligence process by quickly assimilating relevant data to understand the value and issues associated with it.

Google Cloud’s tech talent has also aided Swedish private equity firm EQT in accelerating cloud projects among its portfolio companies.

“You need to be very close to the tech vendor and very close to the talent, and that’s where we can scale out by working very closely with, for example, Google directly, and ensuring that speed of execution is something that will be part of the value creation thesis,” Hallberg explained.

However, implementing new technology at portfolio companies is not always simple. Portfolio companies are sometimes hesitant to rip out and replace the technology stack to which they have grown accustomed.

“A large technology firm like Google Cloud has a lot of things to sell,” Mahidhar of Apollo explained. “Is this the appropriate technology?” Is it going to produce results? “And then what is the company’s current metabolism rate for absorbing technology?” he asked.

Generative AI set to accelerate PE’s move to the cloud

While private equity has largely avoided new technology, executives aren’t wasting time attempting to apply generative AI. Generative AI, a type of artificial intelligence that generates content based on simple prompts and context, has taken Wall Street by storm.

At the enterprise level, the success of generative AI is determined by data, from data quality to data organization in the tech stack to data curation. As a result, the cloud — where the majority of firms’ data and analytics are stored and processed — has never been more important for future-proofing PE.

“All roads lead back to data,” said Zac Maufe, Google Cloud’s head of regulated industries and financial services lead. “You’re only as good as the ingredients you put in here.”

The cloud is the oil tanker, refinery, and gas station if data is the new oil. Data is collected, cleaned, vetted, structured, analyzed, and distributed in the cloud. According to Maufe, it is frequently one of the first and most important steps in any AI venture.

“The industry is at a critical juncture of disruption.” “The pace of change has accelerated, and the good news is that today is the slowest it’s ever going to be because it’ll only get faster from here on out,” Fox-Martin said.

Similar Posts

Leave a Reply