The private equity sector has gone through a turbulent couple of years, with rocketing interest rates putting the brakes on deal making. However, since Q2 2024 we’ve started to see a recovery, and according to EY activity to the end of Q3 is up 36% year-on-year.
So after a somewhat dormant period, many PE firms will be looking to sharpen their pencils, especially if economic growth slowly improves and interest rates continue to ease as expected.
But conditions almost certainly aren’t going to be perfect. That means firms will need to maintain a very clear understanding of their current position, and leverage forecasting capabilities to comprehensively assess the impact of any new deals or strategic changes.
Doing this effectively comes down to data. But gaining oversight of this data across a wide range of portfolio companies spanning multiple industries, geographies, and growth stages isn’t easy. Achieving a clear, consolidated view of liquidity and financial performance across this complex network is especially daunting when relying on traditional, manual processes.
This is where modern treasury technology, like Trovata, can transform how PE funds operate. By automating data aggregation, enabling deep financial insights and streamlining reporting, modern treasury technology platforms like Trovata help PE firms to manage their portfolio companies as efficiently as a centralized business. Here’s how.
Total liquidity oversight
One of the greatest challenges for PE funds is maintaining cash visibility across all their portfolio companies. Each company uses different banks, systems, and reporting structures, making manual data consolidation both time-consuming and prone to errors.
Often the solution to this problem is to delegate cash management to the individual companies. While this can work, it reduces information flow to the investment managers and general partners, and makes strategic decisions slower and more challenging.
Modern treasury technology solves this by aggregating bank data from every portfolio company into a single platform. Using multi-bank connectivity (supporting both API-based and legacy file based data sharing), it provides real-time visibility into cash balances and transactions across all accounts and entities.
This ‘single source of truth’ eliminates the need for manual spreadsheet updates and reduces the risk of discrepancies, allowing PE funds to make faster, more informed decisions.
The right technology can also allow a PE fund to instantly see its liquidity position segmented by categories like industry or geographic region, and identify underperforming assets or areas where cash can be optimized.
This holistic view not only saves time but also ensures that every dollar is working towards maximizing the firm’s return on investment.
Streamlined reporting and analysis
Of course, PE funds need far deeper analysis and reporting than just the current liquidity position. They need to analyze financial data by region, industry, company size and more, in order to track performance and guide strategic decisions. Traditionally, many firms rely on complex manual spreadsheet models, which are infinitely customizable but time consuming to update and highly prone to human error.
Modern treasury technology provides tools like intelligent tagging to drastically simplify this process and enable comprehensive reporting on the fly. Users can automatically categorize transactions and create custom reports tailored to specific variables. This makes it easier to track trends, monitor KPIs, and report to stakeholders.
For instance, a PE fund could use Trovata to generate a report comparing revenue growth of portfolio companies across the martech and payments segments. These insights enable investment managers and general partners to identify which regions or industries are most profitable and where additional support or investment might be needed.
More informed strategic decisions with scenario planning
Private equity is all about scenario planning. Prudent deal making requires the need to assess the potential outcomes of any transaction, and the capabilities to adapt to changing market conditions. Advanced scenario planning tools allow PE funds to assess the impact of different financial decisions on portfolio performance, as well as insights on how different assumptions (e.g. interest rates, capex) affect the bottom line.
Whether it’s evaluating the impact of a new round of debt financing or modeling the potential sale of a portfolio company, Trovata provides true actionable insights. For example, general partners can simulate how interest rate changes might affect debt-servicing costs across the portfolio or assess how reallocating liquidity could maximize enterprise value before a sale.
This capability is especially valuable during volatile economic periods when firms need to act quickly to preserve value or seize opportunities.
Streamlined integration of new portfolio companies
Integrating newly acquired portfolio companies into a fund’s financial ecosystem is often a logistical headache. Each company comes with its own banking relationships, systems, and processes, which can take months to harmonize.
Modern treasury platforms can make this process far more seamless. For example, Trovata’s API-based data aggregation seamlessly pulls financial data from new portfolio companies, providing instant visibility into their financial positions. Users can begin to see real-time banking data, directly from the source, just minutes after the connection goes live.
“We connected [Trovata] with our three major bank partners and the figures came in right as we were talking-it was instantaneous.”
Niall Burke Global Treasury Manager at Eventbrite
Trovata’s flexible architecture also makes it easy to onboard new entities without disrupting existing workflows, and can even support more complex ownership arrangements such as joint ventures.
This streamlined approach reduces the time and effort needed for integration, allowing managers to shift immediately to strategic work on maximizing enterprise value. Speaking of which…
Maximizing enterprise value
At its core, private equity is about maximizing the enterprise value of portfolio companies. Modern treasury platforms support this mission by equipping PE firms with the tools to optimize liquidity management, reduce costs, and identify growth opportunities.
Investment managers can use Trovata to identify idle cash sitting in low-yield accounts and reallocate it to higher-yielding investments. They can forecast cash flow across the portfolio to ensure that every company has the resources it needs to execute its growth strategy. They can identify potential risks to certain sectors and forecast how their portfolio companies might be impacted. They can compare the financial impact of different debt instruments.
They could even highlight potential efficiencies across multiple portfolio companies, for example by reporting on total cloud computing costs across the entire fund, and using this data to negotiate costs down.
The possibilities are practically endless.
By providing real-time insights and automating manual processes, Trovata enables PE funds to focus less on administrative tasks and more on strategic initiatives that drive value creation.
CredThe future of PE treasury managementit availability
We talked about access to cheaper debt above, but it comes with a major caveat. If economic conditions deteriorate, lenders are likely to tighten their lending criteria in order to minimize their own risks. This could affect the availability and terms of corporate financing, particularly for businesses with weaker credit profiles.
Private equity funds are increasingly operating in a data-driven environment where traditional financial practices are no longer sufficient. Modern treasury technology like Trovata is not just a nice-to-have — it’s a strategic imperative for firms looking to stay competitive and maximize returns.
“Since we started using Trovata, our treasury technology capabilities have completely transformed for the better. We have more time to focus on driving strategy and unlocking growth opportunities.”
James Krikorian VP & Treasurer at Krispy Kreme
From real-time liquidity visibility to advanced scenario planning and streamlined portfolio company integrations, Trovata provides private equity with the tools they need to manage their portfolio companies effectively.
By leveraging this technology, funds can transform their financial operations, make faster decisions, improve efficiency, and build greater enterprise value. Ready to see how Trovata can transform your fund’s financial operations? Book a demo today.
