Invest in digital transformation to drive value: How to drive value and prepare for the future

08/09/20

Shawn Panson - Private Company Services Leader - Email

How prepared is your portfolio company for the next big disruption? It may depend on how far along you are on your digital transformation journey. It’s imperative today to invest in digital transformation—not only to help prepare for the next disruption, but also to grow and stay competitive.

Digital transformation is a continual investment in core business platforms to enable differentiated capabilities—implementing new technologies to deliver products and services more efficiently, improve margins, offer a better customer experience and develop and attract talent. A digital transformation is a continuous effort and mindset that should be integrated into the fabric of the business and embraced as part of the strategy.

Why prioritize digital transformation now?

The COVID-19 pandemic might be considered a once-in-a-lifetime “black swan” event, but its impact has been vast, and it put companies around the world on notice. The swift and sudden shift to a virtual work environment highlighted which companies had invested in digital transformation and which had gaps. Many companies faced hurdles as they moved to a remote business environment, whether it was setting employees up with remote access to the tools and technology they needed to operate, or overlooking cybersecurity gaps.

The disruption showed how important it is for companies to be resilient and agile. Those that had made investments in technology continued to perform during the crisis without skipping a beat. They were able to transition more quickly and smoothly to a remote working environment and in many cases, a remote way of managing operations that was essential during the crisis. Embedding digital transformation across the business model can help give companies the flexibility to adapt as the business and markets change.

There is an expectation for companies to be digital in a post-COVID-19 world. That means being able to conduct your business no matter what disruptions may come and being able to respond fluidly to those changes; it’s also being able to advance early deal interaction virtually, from initial management meetings through operational and financial due diligence.

Limiting face-to-face interaction may be easier to do in smaller, tuck-in acquisitions than in larger, transformative or platform transactions, which typically involve more in-person meetings and site visits. These meetings can include early integration plan discussions, help set the tone and build comfort in the transaction. Conducting these sessions remotely may not be the same as doing so in-person, but having the right technology and digital platforms in place can help make things smoother.

Investing in digital as a strategy to get ahead

Investing in digital technologies enables businesses to operate more efficiently to help accelerate growth, driving return on investment. CFOs consistently maintained investments in digital transformation during the pandemic, PwC’s “COVID-19 CFO Pulse” survey showed, underscoring how some continued to prioritize growth and resilience.

Investing in digital transformation can help make your company resilient, competitive, efficient and agile. Middle-market private equity sponsors should have collaborative discussions with their portfolio companies to help ensure the business strategy is appropriately integrated with digital technology to help drive value and to be ready for what the future brings.

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Shawn Panson

Private Company Services Leader, PwC US

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