Private equity companies exist to invest the money they manage by taking controlling stakes in portfolio companies, often small to mid-sized privately held companies in virtually any industry or business line. The goal is for the private equity company to work with company executives to make the portfolio companies more valuable so they can sell them later at a profit.

But in a world where data is the new oil, are these private equity companies really maximizing profits when they fail to fully risk assess the portfolio company's data practices; ensure the portfolio company has a reasonable compliance program; understand both the risks and value the portfolio company's data adds to the bottom line; and require that the portfolio company has sufficient people, processes and infrastructure in place to mitigate risk?

Risks and Solutions During Acquisition

Understanding and appreciating the portfolio company's risk profile should begin even before acquisition. Every target exploration should include some understanding of the data a target portfolio company collects, holds, processes and uses—this includes areas like customer data, marketing data, business sensitive and confidential data, intellectual property and employee data. Technology and data risks at portfolio companies directly impact the value of these companies as these risks are becoming a major focus of due diligence when the companies are sold, often leading to a reduction in the purchase price or indemnifications or, in some instances, killing the deal.