Macrobond is a key tool for private equity investors throughout the investment lifecycle

Background

Investment strategists globally use Macrobond to inform investment decisions and support asset allocation strategies. The platform offers a wide variety of use cases across its various client types. One such client type is the private equity investor.

Jason Warner, Head of Data Science at the private equity firm Francisco Partners, uses Macrobond to analyse the firm’s new investments and monitor its existing portfolio.

“This tool has sharpened our insights into the macroeconomic drivers and landscape that affect our investment prospects,” Warner said. “Using Macrobond’s data, we can deepen our analysis and gain greater clarity on how likely a company is to achieve their long-term goals.”

He noted that Macrobond can be deployed both as part of market due diligence in the investment process and in helping portfolio companies achieve their full potential.

Francisco Partners also uses research powered by Macrobond in investor presentations and reporting.

Market analysis and forecasting: using Macrobond to quantify market size and growth

Warner often deploys Macrobond in the deal process, when the team is examining countries, regions or industries for investment opportunities. Macrobond’s extensive data allows him to dig into the growth trajectory and fundamentals of any given market and test the investment thesis.

For instance, Macrobond helps the investment team assess industry trends relative to the period before COVID-19 to evaluate whether recent high growth is temporary, i.e. a “COVID bump.” Armed with this insight, the team is able to temper any over-optimistic projections from the management teams of target companies.

For a different example, certain states are ageing more quickly than others. Macrobond can shed light on how pricing is trending in regionalized industries such as health care.

Macrobond’s data can also inform how many businesses or people could potentially be customers of a company’s product or service – a proxy for the total addressable market (TAM).

“Macro data can provide another view into the health and growth of an end market. If a key buyer demographic is surging, that could support a higher revenue growth forecast and a higher valuation,” Warner said.

“Investors should also assess the risk of overpaying on a deal because of the current stage of the business cycle,” he said. Warner cited one case in which a company was found to be highly sensitive to the economic fortunes of a narrow sub-segment of consumers. That can be evaluated quickly in Macrobond – and often deviates from the narrative suggested by the headline unemployment figures. The investor may still choose to do the deal, but they can do so having quantified and appropriately priced the risks associated with the transaction.

Portfolio monitoring: using Macrobond to track industry developments and identify value creation opportunities

Once a deal has been completed, Macrobond can play a key role in portfolio monitoring and value creation. If a company is outperforming – or underperforming – the investment case, macro data helps inform how much of the divergence is due to the economic environment shifting rather than management execution.

For example, Francisco Partners used detailed e-commerce data to gauge in real time whether a portfolio company was gaining or losing market share.

“The granularity Macrobond provides allows us to recreate what is happening today in the industry and corroborate what we are seeing at the company level,” Warner said.

It can also inform business strategy. “If inflation picks up in our target segment, even if economy-wide inflation is muted, that could be an opportunity for our portfolio company to rethink pricing,” he said.

Better analysis via data accessibility and integration 

Warner and his colleagues deploy Macrobond to complement the confidential data room information of takeover talks, the combined wisdom of expert network voices – and as an alternative or supplement to the often hefty fees for third-party research charged by consultancies.

Macrobond’s integrated platform enables Francisco Partners to study disparate data sources and save time. For example, rather than finding one-off information on shipping container volumes, regional air cargo, and oil prices, Warner and his colleagues can collate all this data using Macrobond as a one stop shop. This saves countless hours of research to identify, verify, and align data sources.

“We mix macro data from Macrobond with our own research to make sense of it all,” Warner said.

Investor relations

Macrobond acts as a useful tool when private equity firms communicate with their investor clients. The integration of data analytics and visualizations enables Francisco Partners to easily create intuitive, appealing charts giving the firm’s perspective on investment themes and opportunities.

Warner sees Macrobond as a versatile asset throughout the investment process, enhancing Francisco Partners’ ability to make and communicate informed decisions by providing detailed macroeconomic insights.

“It helps us understand the market picture and complements other due diligence workstreams, ultimately leading to what we believe to be more strategic and successful investment choices.”