Private Equity Firm

Turning data rooms into AI & data DDs

AI / Due Diligence
Private Equity
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Private Equity: Assessing GenAI threats & opportunities for a potential investment

Our client, a longstanding, London-based private equity firm with over £1.7b in AUM, specialises in investing in mid-market tech businesses. When considering an investment in a tech-powered media business, they needed a better understanding of the threats and opportunities in the GenAI landscape.

Rapid developments in GenAI call for enhanced due diligence

The recent, rapid development in GenAI technology led our client to carry out enhanced due diligence as part of their deal process. The core business of the potential investment was selling information products to clients interested in global, national and local news within a specific domain. They aggregate data from multiple sources—largely public; tagging, curating and summarising it for subscribing customers.

Developments in natural language processing (NLP) and generative AI (tools such as GPT4, ChatGPT and Google’s Bard) overlapped with the potential investment’s core proposition and operating model. So, the question to be answered: Are these new technologies going to help or hinder the business?

Mapping AI applications onto a potential investment’s value chain

Diving into the data room, Datasparq’s team of AI practitioners mapped out the business's value chain, examining the potential impact of AI on each node. In total, Datasparq identified 10 potential applications of AI.

Each application was broken down and examined: What’s the potential business value? What technical capabilities and skills are needed? How long will it take? Is the business equipped with the necessary talent to implement the application? What risks and shortcomings are there with an AI approach? Could a competitor implement something similar better, or quicker, thus presenting a risk?

Expert recommendations to uncover value and understand risks

Within a week—during a DD process with limited time—Datasparq’s AI experts provided the client with a report containing a thorough overview of the threats and opportunities presented by the rapidly-developing AI landscape. Detailing the key emerging AI technologies, the investment team were able to understand and assess the pertinent potential risks and rewards of these new technologies for this investment, and generate some real conviction for their investment case.

Moreover, the report gave a clear, substantiated action plan regarding the investment. The key opportunities were highlighted and prioritised according to impact and ease of implementation, while the risks were identified with mitigating steps outlined.

In the fast-moving world of technology, many private equity firms already view AI and data DDs as essential. To understand the true risks—and value-creation opportunities—in a potential portco, request an AI and data DD today.

With the capabilities of generative AI expanding at pace, AI due diligence is critical for PE firms.
John Wyllie, Managing Director at Datasparq

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