{ "docId": "019dd923-5e88-73ef-bd58-ea0a19e8bec2", "docSlug": "04d95f99a3b1a7ef", "documentTitle": "ey ivca monthly pe vc roundup december 2022", "authorId": "MorganStanley", "authorName": "EY", "documentKindSlug": "consulting-deck", "documentKindLabel": "Consulting deck", "sourceTypeSlug": "equity_research", "sourceTypeLabel": "Equity research", "presentationDate": null, "orientation": "portrait", "aspectRatio": 0.707, "pageNumber": 10, "pageCount": 24, "prevPage": 9, "nextPage": 11, "slideType": "industry_trends", "function": "establish_context", "density": "overcrowded", "nDataPoints": 5, "notes": "Slide discusses the shift of digital from a competitive edge to a necessity in PE value creation.", "elementsJson": [ "headline_text", "paragraph", "bullet_list", "big_number", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-5e88-73ef-bd58-ea0a19e8bec2/10", "deckHref": "/decks/019dd923-5e88-73ef-bd58-ea0a19e8bec2", "deckJsonHref": "/decks/019dd923-5e88-73ef-bd58-ea0a19e8bec2.json", "deckAnchorHref": "/decks/019dd923-5e88-73ef-bd58-ea0a19e8bec2#slide-10", "components": [ { "bbox": null, "kind": "callout", "text": "The benefits are clear: non-technology firms that invest in digital are valued higher than their peers – and these benefits increase over time.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-2e39-7343-a583-f6b6133504db", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.35, "w": 0.43, "x": 0.51, "y": 0.22 }, "kind": "list", "text": "Shares of listed non-technology companies that implement digital technologies are valued significantly higher than firms that don't, by between 7% and 23%. Moreover, their price-to-earnings ratios are higher, by anything from 3% to 9%. Firms that embrace digital have greater returns per dollar of incremental earnings than those that do not, by between 30% and 90%. Companies with a chief information officer or similar role within the senior leadership structure (i.e., someone with responsibility for researching new technologies) outperform those companies that have no such designated roles, with a 60% greater return on assets.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e0f564bb-5a9d-4b67-beb6-487ffe63dc66", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.15, "x": 0.06, "y": 0.75 }, "kind": "metric", "text": "60%", "attrs": null, "subkind": "big-number", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ea1b2a01-378b-47f0-ac0d-effb41117bb6", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "Return on Assets: 60%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd952-2e39-7343-a583-f87f343e5b20", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.42, "w": 0.42, "x": 0.06, "y": 0.22 }, "kind": "paragraph", "text": "Before the COVID-19 pandemic, in a world of historic high pricing multiples and record dry powder, digital was already emerging as a value creation lever to gain an edge in a highly competitive market. Today, the need to prepare for and adapt to crises has never been more pertinent. Embracing digital is less an option now than a necessity; the pandemic has forced companies to digitize in areas that were previously considered too high risk. But digital technology also allows investment firms and portfolio companies to anticipate and navigate externalities that come from uncertain economic climates, changing consumer tastes and needs, and a dynamic regulatory landscape. Furthermore, a strong digital agenda is leaner and not bound by physical real estate, empowering workers with flexibility and connectedness. As the focus on digital technologies rapidly accelerates, activating a digital strategy throughout the deal life cycle is becoming a core component of the value creation agenda and leading to higher multiples on exit.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "226728f1-a142-4c55-af9e-c04edde849fc", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.88, "x": 0.06, "y": 0.13 }, "kind": "paragraph", "text": "Digital technology helps PE firms and their portfolio companies to increase efficiency, optimize risk management, and boost growth.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3a19742f-91cb-47c4-99ee-9c209e66a99a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.42, "x": 0.06, "y": 0.78 }, "kind": "paragraph", "text": "Companies with a CIO or similar leadership role show a 60% greater return on assets than companies that don't have such roles.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "65e4f791-7fa8-41fa-be4a-10911e439bbb", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.43, "x": 0.51, "y": 0.62 }, "kind": "paragraph", "text": "In the front office, proprietary algorithms will unlock new investment opportunities and reduce the effort required to track potential acquisition assets. Predictive analytics will identify value creation levers, and product digitization will identify new segments and approaches. In the back and middle office, operations teams will use advanced analytics to unlock greater insight to a portfolio company's potential. Real-time interaction with LPs will occur via customizable reporting platforms, and firms will employ cloud computing to increase connectivity with portfolio companies and enable real-time alerts.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fec4fdab-e0c4-4f98-9237-baa28c12b67e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.6, "x": 0.06, "y": 0.92 }, "kind": "source-note", "text": "1. \"Going Digital: Implications for Firm Value and Performance,\" Wilbur Chen and Suraj Srinivasan, May 2019, HBS Working Paper #19-117", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e6182b1a-87c0-46cc-afee-4555fafe4e14", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.45, "x": 0.06, "y": 0.06 }, "kind": "title", "text": "The digital landscape", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "59a2a09c-77ab-494d-8a30-3b6a189560a4", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 22, "from": 8, "beatId": "214f21e1-2b48-4ee9-ada9-631d6343d29c", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Solution & Approach", "beatSlug": "consultants-gambit-solution-approach", "evidence": "The thesis headline, key messages, and subsequent slides outline the three levers of value creation and their implementation.", "position": 2, "confidence": 0.8, "parentBeatName": "Turn", "parentBeatSlug": "turn" } ], "loops": [ { "to": 22, "from": 8, "name": "Logic Chain", "slug": "01-logic-chain", "bestFor": "Skeptical audiences, controversial recommendations, rigorous analysis", "matchId": "6aec3b34-6b9f-4204-9362-282567707c08", "evidence": "The document presents a logical chain of ideas, linking the three levers to the NextWave of Private Equity.", "position": 0, "objective": "To demonstrate how the three levers of value creation are interconnected and essential for PE firms' success.", "structure": "Premise 1 (Accepted truth) -> Premise 2 (Observed fact) -> Therefore... (Inevitable conclusion)", "confidence": 0.7, "description": "Build an airtight chain of logic where each premise leads inevitably to the conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }