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In this video,
Jeffrey Neuburger, head of the Firm's Blockchain Group, and
Jonathan Benloulou, a partner in the Corporate Department,
explain what factors private equity firms should consider when
evaluating Blockchain for their portfolio companies.
Jonathan Benloulou: Private equity firms are
dealing with a new set of questions for their portfolio companies.
Given the operational expertise that private equity firms bring to
bear to their portfolio companies — the fact that they've
got really deep industry, or market, or sector knowledge; the fact
that they are long term investors, and they often provide ongoing
access to capital to their portfolio companies – it may make
sense for private equity firms to look at Blockchain technologies
for their portfolio companies.
Jeff Neuburger: There are a number of factors
that a private equity firm should consider in evaluating Blockchain
for their portfolio companies.
A threshold factor for private equity firms to consider is
whether its portfolio companies need to upgrade their technology.
If there is a decision that the incumbent technology platform needs
to be upgraded or changed it is certainly a time to consider a
Blockchain.
Another factor to consider is whether your portfolio companies
have many direct and indirect commercial relationships with third
parties. There often is a lack of visibility for the portfolio
company into how its suppliers and its third parties are
performing. Blockchain provides that visibility.
Another factor to consider is whether your portfolio companies
are engaged in businesses that require transactions to be processed
very quickly. The reason this is important is because Blockchain
based transactions are not processed as quickly as traditional
client-based server transactions.
Another factor to consider is how much of your portfolio
company's data is confidential. A business that allows some
level of accessibility while keeping other information confidential
is well suited to Blockchain.
The final and perhaps most important factor is how much money
can you actually save by implementing a Blockchain-based system? So
for a private equity firm and its portfolio companies there has to
be an analysis done as to whether the cost of switching to
Blockchain outweighs the cost of staying under its current system
over the long term.
Jonathan Benloulou: By considering, among other
things, these 5 factors private equity firms can look into whether
Blockchain technologies or certain application of Blockchain
technologies makes sense for their portfolio companies. At
Proskauer we work across industries to help clients implement new
technologies.
Jeff Neuburger: We help private equity firms
and other companies find the right solution from the wide variety
of technologies that are out there including Blockchain.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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