On Wall Street, the use of publicly available information (PAI) has become table stakes for private equity firms, investment strategists and corporations seeking to gain an intelligence advantage. With anticipated relief coming on interest rates, most private equity firms expect deal activity to increase in the first half of 2024. The more money in play, the better information investors need. PAI must be in every investment firm's toolbox.
PAI is anything seen on the internet that is not behind a login. The amount of data humans generate by browsing the web, watching streaming TV, shopping for groceries, uploading their workouts, paying bills, trading stocks and posting product reviews increases exponentially every day.
As such, the ability to collect and analyze PAI in significant amounts has become an indispensable and powerful tool for financial institutions, strategic investors and corporations. Those that don't will be left behind. At the same time, it's critical to make sure best-practices guardrails are in place. Every party that collects, analyzes and uses PAI must strive to be a good citizen of the internet.
How can PAI help private equity and venture capital firms, investment banks and corporations? There are many ways.
For example, a private equity firm considering an investment in a company might collect and analyze that company's recruitment ads over the course of a year to gain insight into its strategic direction. Have the company's sought-after job skills remained constant, or is it increasingly seeking to hire people in fields that would indicate a new corporate direction?
Pricing data is another valuable trove of PAI. Looking at discounts offered on one retailer's website in one day may not reveal much about a company or its customers. But looking at all the discounts that the retailer has offered on all of its products for an entire year can tell you what the company believes about its products and its customers.
PAI is more than traditional research. Financial sector entities and corporations have long mined financial reports, industry analyses and market trends in their due diligence to make investment decisions. PAI takes them a step beyond traditional research, making them smarter and quicker than competitors. No investment or major business decision should be made without a thorough analysis of all relevant PAI.
In addition to SEC filings, valuable information can be found in the analysis of online reviews on platforms like Yelp, Amazon and Google which offer insights into customer satisfaction, common pain points and areas for improvement. Companies can use sentiment analysis tools to gauge overall customer sentiment and identify specific issues.
Companies can leverage publicly available surveys and research conducted by third parties or government agencies to gain insights into broader industry trends and consumer preferences. This information can inform product development, marketing strategies and customer engagement initiatives.
PAI can give valuable insight into a company's intellectual property prowess – or lack thereof. Patent filings can provide insights into a company's innovation, technological strengths and potential competitive advantages. Examining a company's open-source contributions (such as GitHub) can provide insights into its technological capabilities, development practices and collaboration with the broader tech community. Academic publications can open windows into the scientific or technological foundations of a company's innovations and technologies.
Studying the valuation multiples of publicly traded companies in related industries can provide benchmarks for assessing the valuation of potential acquisitions. Investigating publicly disclosed contracts and agreements can shed light on a target company's relationships with suppliers and customers.
PAI can uncover information on lawsuits, regulatory issues or legal challenges that may affect the target company's operations or value. Exploring public government databases for information on contracts, grants, subsidies or incentives received by the target company will give information about its financial health.
From a personnel standpoint, collecting and analyzing the professional networks and profiles of a company's board of directors and leadership team can provide insights into their expertise and industry connections.
The power of PAI is evident. That's why it's so critical that practitioners in this space self-regulate and adhere to the highest ethical standards of behavior. First and foremost: PAI and personal information should never intersect. Only PAI that has been anonymized and aggregated should be collected. Data that can reveal individuals' identities, such as biometrics and advertising information, is off-limits. Practitioners should follow the data compliance practices of the regulatory bodies in whichever sector they are operating.
Second, responsible PAI firms should leave websites as they found them. Crude, common-crawl discovery of PAI can disrupt the operation of websites they're looking at. That can slow down or even cripple websites for other users.
Wall Street firms and corporations around the world are experiencing a revolution in PAI that is growing more revolutionary by the minute. By smartly and ethically collecting and analyzing PAI, private equity and venture capital firms, strategic investors and corporations can make smarter investment decisions and serve their customers better. Those that don't won't have a seat at the table.
Rayne Gaisford is Chief Data Strategy Officer for Vertical Knowledge, a data products, insights and intelligence company.
(Opinions expressed in this article are the author's own.)
