How to Take a Data-Driven Approach to Sector Specialization

Download the full SPS 2024 Sector Dynamics Report now!

Private equity firms are increasingly adopting sector-focused strategies, recognizing that specialization can provide a crucial edge. As firms strive to outperform in a crowded market, the ability to generate top-tier returns is no longer confined to traditionally high-growth sectors. Instead, success hinges on the strategic alignment of a firm’s unique strengths with the sectors where those capabilities will be most impactful.

Historically, these strategic decisions have often been guided by intuition and experience. Today, the emergence of advanced data analytics tools is transforming this process, offering firms a fact-based approach to refining their sector focus. By leveraging data-driven insights, private equity firms can better navigate the complexities of sector and sub-industry dynamics, optimizing their investment strategies to achieve superior outcomes.

The Sector Dynamics Report examines evolving M&A trends through sector and sub-industry analysis, demonstrating how data-driven strategies empower firms to identify opportunities, mitigate risks, and enhance their competitive positioning.

Section 1 – Market Activity Trends by Sector analyzes deal volume trends including breakdowns of the most active sponsors and intermediaries by sector of focus, demonstrating how firms can leverage data analysis in their sector strategy to hone deal sourcing.

Below are some examples of advanced analytics for firms to better understand market dynamics within their focus segments:

• Market Activity by Buyer Type & Sector (L1) – Private Equity vs. Corporate BuyersDeals Closed across all sectors, 10+ MM EV, based in North America, with private equity or corporate investors, 7/1/19-6/30/24.

• Top 25 Intermediaries by Sector (L1) & Industry Group (L2)Deals Closed across all sectors, 10+ MM EV, based in North America, with private equity and corporate investors and sell-side intermediaries, 7/1/19-6/30/24.

Section 2 – Subindustry Deep Dives drills down into four specific sub-industries (Home Services, Specialty Clinics, Cybersecurity, Business Intel & Data), illustrating the granular trends that are shaping these sectors. By analyzing market activity through various lenses—including the most active intermediaries, investor types, geographic patterns, and sponsors’ portfolio holdings by vintage—this section provides a comprehensive view of the forces driving deal flow at the sub-industry level. Key examples of these include:

• Subindustry Deep Dive: Home ServicesDeals Closed in the Home Services subindustry, 10+ MM EV, based in North America, with private equity and corporate investors.

• Subindustry Deep Dive: CybersecurityDeals Closed in the Cloud & Network Security Software and Cybersecurity Services subindustries, 10+ MM EV, based in North America, with private equity and corporate investors.

The insights provided by this report are vital for firms looking to optimize their sourcing strategies within target sectors. By diving deep into sector and sub-industry analysis, the report equips firms with the granular data needed to make informed decisions and strategically align their unique strengths with the most promising opportunities. With the right data in hand, firms can navigate the complexities of the market with greater precision, identifying emerging trends, mitigating potential risks, and ultimately achieving superior returns. Whether you’re looking to refine your sector focus or stay ahead of evolving M&A trends, the SPS Sector Dynamics Report is an essential tool for driving data-driven success in today’s competitive landscape.

For more, download the full SPS 2024 Sector Dynamics Report or request a demo of the SPS platform to learn how we can help develop a data-driven sector strategy.