Assessment of investment opportunities or due diligence is the most important step to ensure the overall success of private equity companies’ investments.
Private equity deals can take months to close because every opportunity needs to be properly investigated. Traditionally, the due diligence process around potential investments is labor intensive, costly, and time consuming, often making the research findings dated.
How can private equity firms gather intelligence at a quick scale? The answer is by leveraging digital insights through tools like Brandwatch Consumer Research.
Three main benefits of utilizing a consumer intelligence solution over traditional research avenues are:
- Real-time insights: Firms that leverage social listening get to analyze and work with insights in real time and can better inform strategic decisions.
- Alternative data sets: Unstructured data, such as call logs, call transcripts, and customer support emails, combined with unprompted consumer opinions from the web (think of conducting multiple, large-sized focus groups in real time) can enrich your analysis and help build more in-depth profiles of your target companies. According to the International Data Corporation (IDC), up to 90% of unstructured data is never analyzed. Leveraging this kind of data has great potential for getting a competitive advantage.
- Saving hours of researching: When done right, social listening delivers quality insights with lower effort and investment on the client’s side.
Why turn to third-party professional services when your company can have your own internal consulting partner? A good consumer intelligence solution can make it easier to build smart, data-driven investment recommendations.
When it comes to due diligence, there are several areas where social listening can be used to help your firm gather valuable insights to feed into your investigation process:
- Brand health analysis
- Brand reputation
- Understanding brand attributes and competitive advantages
- Price perception
- Market research
Let’s review these use cases more closely.
Brand health analysis: Understanding a brand’s story over time
The first step with brand analysis is to analyze its historical performance.
For example, using Brandwatch Consumer Research, we collected online mentions related to Target, one of the large supermarket chains in the US with over 1,900 stores.
The chart below shows the volume of conversation relating to the Target brand over the past five years. As you can see, the volume of mentions dropped in 2019, but the conversation has picked up and been steady since.
When doing brand analysis, it’s very important to look at numbers in comparison, so we compared the online conversation relating to Target to its competitor Kohl’s, another large American department store retail chain with around 1,200 locations.
While comparing the volume of conversation relating to these two brands, we saw that the volume of conversation around the Kohl’s brand is greater.
Volume alone can tell us a little, but digging into the data can give us the full picture. With the right tools, even if we're studying many millions of online conversations, this is easily done.
Investigating conversation triggers
To better understand a brand’s story, it’s helpful to analyze what’s triggering discussions around your potential acquisition.
Brandwatch’s AI analyst Iris detects changes in data and can help your team determine what caused spikes in conversation, saving them hours of research.
Let’s go back to Target. In the example below, we looked at the last six months of social conversation related to Target. As you’re looking at the graph showing mention volume over time, you can tap the button which activates Iris which will show you what drove the spikes.
Each element of the chart is clickable so you can find out exactly what links, tweets, hashtags, or other types of post are driving the conversation and why.
With just a few steps, you can gather data on the digital performance of your acquisition target, making brand analysis smarter and faster. You can also identify potential opportunities or threats about the brand that are otherwise very difficult to spot using traditional due diligence research methods – all while increasing confidence in your investment recommendations.
Analyzing the competitive landscape
Related to the above, a due diligence researcher might also want to know how the acquisition target brand is performing compared to the competition. Share of voice is a great metric for that. It can be used to measure conversation around the top brands in the category and how they compare to the potential acquisition company’s share of voice.
Let’s go with a different example.
A private equity company is looking to expand its portfolio with a brand in the plant-based personal hygiene product category.
In our case, we analyzed three well-known brands in the personal hygiene space.
Looking at the pie chart above, it’s evident that Brand 3 has a larger share of consumers talking about it online than its competitors.
Change in online performance
Alongside share of voice, it’s also helpful to track changes in brand performance over time in comparison to competitors (which will help further clarify the brand’s place within the market).
Looking at the chart below, you can see that while all three brands saw their share of voice decrease in the last 12 months, Brand 1 saw the largest drop – 56% – when compared to the previous period of time. Brand 2 only saw a 1% drop in share of voice and seems to have been getting mentioned consistently in consumer conversations.
Channel growth and media coverage
When performing a due diligence analysis on a brand, the changing (increasing) volume of media coverage can be a good indicator (assuming coverage is positive), suggesting that media outlets are becoming more interested in the brand.
We used Brand 3 as an example to illustrate this type of analysis.
While the volume of media mentions looks quite low so far in 2022, looking at the last four years of data revealed a potential seasonal pattern that might be one of the reasons for low media coverage between September and March. This demonstrates the importance of looking at data over time as opposed to taking a snapshot.
Customer perception and brand reputation analysis
This type of research can offer organizations rich insights around customer perception of the potential acquisition company.
Going back to the example of Target, we looked into brand sentiment.
This visualization allows you to find out where customers are advocating for or complaining about a brand. For example, by examining Review data we found consumers favorably discussing their online shopping experience and others praising the selection of brands available at Target.
This is a very simple way of looking at sentiment – you could also filter by product lines or aspects of the customer journey if you wanted to get a better understanding of perceptions around a particular part of the brand’s offering. By further exploring reviews and feedback from consumers, researchers can better understand the drivers behind positive and negative conversations around the brand and pick up on red flags early.
Understanding brand attributes and competitive advantages
What distinguishes a company from its competitors? What are the reasons behind a brand's popularity? And will they continue to be popular?
Let’s go back to the example of investigating the plant-based personal hygiene category.
A research analyst working on this project might want to start by exploring the general (non-branded) conversation relating to personal hygiene products, including mentions of ‘plant based’, ‘vegan’, and ‘soap’.
This query would be designed to pull public conversations related to known and unknown products and pick up new product conversations.
Right away, you can see some words (and attributes) that are mentioned more than others, like different scents, and how the products are made (eg hand-crafted vs cold-pressed soaps, handmade, food soap, etc).
Analyzing attributes across different brands
The analyst might want to get more granular by comparing different conversation drivers such as established consumer talking points for the industry (eg packaging, smell, price, sustainability, quality, customer service) or using some of the categories highlighted in the word cloud above.
One of the ways to do a comparative analysis in Brandwatch is by using search queries to pull conversations mentioning specific keywords.
Below we analyzed the three brands using the following topics: handmade, natural, packaging, quality, scent, and vegan.
This quick analysis shows that scent and packaging were the most-mentioned attributes in consumer conversations relating to the three selected soap brands.
We applied additional categorization and broke the results down by brand to have a better understanding of how these brands are perceived by consumers in relation to their product attributes.
This chart shows that consumer perception of a product being natural is most commonly associated with Brand 1. Brand 1 and Brand 2 are also much more frequently mentioned in conversations relating to scent than Brand 3.
One of the most commonly discussed attributes of Brand 3, on the other hand, was packaging.
Private equity firms can use online data to answer key questions that’ll help them understand what consumers are actually looking for in a product/brand, what particular brands are best known for in relation to others, and how the market landscape looks prior to making their next investment.
Price perception
Knowing how consumers view pricing of a product can help inform all kinds of things – for example, whether there’s room to increase the price, or if the product is deemed too expensive.
Looking at the chart above, it’s evident that among the three selected brands, Brand 2 is perceived as the most expensive brand, and Brand 1 is the least expensive.
Further analysis, like looking at perceptions of quality, could help confirm whether a price adjustment should be made to maximize the potential of a company's products.
Market research
Contextual factors and details play a fundamental role in shaping every investment business decision. Without fully understanding the historical context behind a particular topic or trend and consumer attitudes around them, private markets analysts can struggle to get the full picture on the acquisition target.
Gathering consumer insights online
Say a private equity firm is looking to expand its portfolio into the non-alcoholic spirits and beverages space. What are some ways the company’s research analysts could go about gathering quick and meaningful insights about the market?
The answer is by discovering and analyzing unprompted and, unlike many traditional research methods, non-incentivized consumer opinions online.
Asking productive questions of the data can help research analysts discover deep insights that can shape their investigation and impact decision making. And with tools like Brandwatch Consumer Research your team can have access to the world’s largest focus group via online mentions and comments.
Here are some of the questions a research analyst looking into the non-alcoholic beverages space might ask:
- What does the conversation around non-alcoholic beverages look like today, and how has it changed over time?
- Are people talking about no- and low-alcohol beverages less or more?
- What channels do they use?
- What regions are trending in those conversations?
- What are consumers reporting as their favorite beverages and why?
- What are the top 10 most-mentioned non-alcoholic brands, and what do people say about them?
- What topics are coming up most in negative conversations around non-alcoholic drinks?
- And so on.
Consumer Research can also be used to analyze the future potential of a sector/category that the investment target operates in. This helps investment professionals figure out if the current trend is a fad or is it here to stay. Analysts can extrapolate the data to see if they can predict future sector growth – and do it ahead of their competitors.
All of this research and more can be done by an in-house team of analysts in a matter of just a few hours.
So, continuing with our example, what can online conversations reveal about consumer drinking habits? Let’s look into some of the questions above.
Similar to using keywords in a Google search, we used a query to gather mentions relating to non-alcoholic beverages in consumer discussions using Consumer Research.
We looked back to 2017 and, as you can see from the graph below, the data suggests there’s an ongoing upward trend.
There were also several conversation spikes. These types of spikes are generally worth investigating as part of due diligence research. It’s as easy as tapping on each spike and reviewing mentions associated with them to discover what was driving the conversation, or allowing Iris to do that work for you.
The final word
As you can see, it’s easy and fast to build a helpful narrative based on unprompted consumer opinion that you can then feed into your due diligence process.
By employing curiosity and a discovery mindset, research analysts can discover rich insights crucial to delivering impactful work and building more robust investment cases.