Introduction to private equity and the role of due diligence surveys

Private Equity is a form of investing where investors take part in activities such as buying and restructuring companies. PE firms are not listed on a stock exchange. Institutional investors usually put money into investments.  Some advantages of private equity are easy access to funds, liquidity, and financing ventures.

A private equity firm is tasked with analysing all aspects of a deal before committing money to it. Private equity research is needed to understand which opportunities exist in different markets. Additionally, it also gives insights into which deal is most profitable. To assess an investment avenue, a PE firm conducts commercial due diligence as part of the research process. 

PWC’s 2022 outlook on private equity states that the volume of PE deals declined by 26%, during the first half of 2022.

In today’s fast-paced world, commercial due diligence surveys have become very popular. Today, there are thousands of different products and services in hard-to-reach markets. Due diligence surveys can give information on competitors, customers, and industry. For competition, due diligence surveys can provide a 360-degree view of where a company stands. To understand customers, they can look inside into the buying journey and personas. Lastly, at a macro-level, they can show the kind of industry the business operates in.

Due Diligence surveys give an edge to a company because they can help synthesise data. From there, investment professionals can get insights into a company, product, or market.  Below, we explain some of the advantages of due diligence surveys for PE firms:-

1. They generate information about the commercial aspect of a company and help avoid bad deals.
2. Uncover customer preferences, trends, and perceptions about a company or its products.
3. Improve the overall portfolio of investments/deals
4. Assess which opportunities are worth investing
5. Improve prospects of fundraising
6. Understand the financial and operational risks of an investment

Check out our recent article on how a Due Diligence Survey for private equity can support investment decisions.

Expert Calls in Private Equity 

Expert calls are conducted to get insights from experts in their respective fields. PE firms that are in need of expert calls approach an expert network with a list of requirements. For example, the number of years of experience that the expert has in a certain industry. Then the expert network matches the PE firm with an expert from their internal database. Consequently, the expert consultation takes place which usually is for an hour.

You can read our recent blog on the pros and cons of expert calls for private equity to get more information.

To summarise, expert calls provide the following benefits for PE firms:

1. Generally, PE firms need specific information about niche products or industries. This kind of specialised information can be obtained within minutes.
2. Typically, the private equity industry has intense competition. This is where expert calls for private equity come into play. Experts act as a consultant to your PE firm. Also, they can help you gain an edge over competitors.
3. Usually, experts will have many peers, contacts, and connections in their industry.  By using expert calls for private equity, PE firms can connect to other experts to gain more clientele. 

Due Diligence Surveys over the phone Vs Expert Calls in Private Equity 

Having talked about the benefits of due diligence surveys and expert calls, let’s discuss the difference between them. 

1. Quality of Responses

Due Diligence Surveys over the phone give slightly different results than expert calls. During due diligence surveys, the quality of answers depends on the respondent’s profile. For example, consider how a PE Analyst with one year experience would answer a survey. Now, compare that to a PE industry expert who has 10+ years of experience. In this case, there’s a high chance that you will get dramatically different answers. However, you need to also consider the difficulty and cost of sourcing the expert. 

To add to this, think of the kind of due diligence survey that you are planning to conduct. If the nature of the survey is such that answers can only be gathered by an expert, the choice is simple. However, if you can get similar answers from working professionals, you can save on the cost of recruiting an expert. 

2. Cost

Usually, expert calls can be very costly, upwards of $100 per call. Especially for a small business wanting to grow, this cost can be a heavy burden. With screening applicants, and custom targeting, it’s possible to get similar answers from PE professionals. In this way, your business can cut costs without compromising on the quality of the due diligence survey.

With the help of due diligence surveys over the phone, you can get responses from experienced professionals. 

3. Expert Network Vs Survey Panel Provider

If you are conducting an expert call, consider hiring an expert network. One reason why companies hire expert networks is to benchmark against competitors. As trends change, the necessity to get information on markets, products, and services is growing. Expert networks can help you get specialised knowledge from thought leaders. Whereas if you go with a due diligence survey, you might want to hire a survey panel provider. Luckily, at GrapeData we can help you get experts and conduct due diligence surveys.

4. Experts Vs Survey Respondents

To emphasise, the target respondents in expert calls and due diligence surveys will be different. Survey respondents could be investment professionals, C-level executives, or decision makers in PE firms. On the other hand, experts will be exclusively industry leaders with years of experience. 

5. Time taken (for screening)

Expert calls and due diligence surveys each take their own time to conduct. In expert calls, the time taken to find experts needs to be considered. Whereas, in a due diligence survey, you need to take into account the whole length of the project. Also, make sure to think about screening applicants for your due diligence survey. This might increase the duration of the project, if many respondents get disqualified. 

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To sum up, time, cost and sourcing respondents differ in expert calls vs due diligence surveys. Depending on your company’s priorities and the nature of the project, you may choose to go with either opinion. But, if you still need guidance on your data survey, we are here to help. Contact us at sales@grape-data.com to see how we can help you.