In the crosshairs: private equity firms help tech companies reinvent themselves

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Private equity (PE) firms are helping tech companies reinvent themselves during a time of unprecedented disruption.

Incumbent technology company executives increasingly find themselves in the crosshairs of activist investors and disruptive technology start-ups, as their core businesses are overshadowed by hot new digital technologies (cloud, mobile, social and big data analytics) and the new business models they enable (such as the sharing economy).

But being overshadowed doesn’t equate to being out of business. And such companies’ declines in enterprise value are not always in proportion to any actual decline in ongoing business prospects. In the delta between market value and actual declines lies opportunity for savvy investors and tech executives.

This opportunity is not without risk. A company in the crosshairs must calculate multiple challenges coming in fast from new directions, and pivot. Some will have the vision and agility to transform; others will not. Some will have to buy, sell or spin-off one or more business units to remain competitive. In aggregate, there is a tremendous amount of enterprise value at stake.

Enter PE – often a well-suited match for tech companies in the crosshairs. However, PE firms face risk, too. They must differentiate between companies that have potential to transform and those that do not. That means assessing brand, customer relationships and core technology, as well as specific financial metrics.

Whether you’re an executive of a large incumbent technology company assessing how to get your organization out of the crosshairs, or a PE firm evaluating prospective investments, a crosshairs deal could well create a win-win scenario. To learn more about the opportunities and associated risks, download our Top of Mind report: In the crosshairs: private equity firms help tech companies reinvent themselves.

“Every successful tech company will find themselves 'in the crosshairs' eventually because the speed of technology innovation means even today’s disruptors face their own disruption tomorrow.”

EY - Jeff LiuJeff Liu
Global Technology Industry Leader
Transaction Advisory Services
EY