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Infrastructure investment

Infrastructure investment 2008-04-01 Staff Writer You have one partner at Heathrow airport. Another is at his vacation home in Martha's Vineyard. Another is spending the week in the Hong Kong office. All of them want one thing ? access to a single document located on the Q drive back at headquarters. If they

You have one partner at Heathrow airport. Another is at his vacation home in Martha's Vineyard. Another is spending the week in the Hong Kong office. All of them want one thing ? access to a single document located on the Q drive back at headquarters. If they don't get this immediately, it will mean that an attractive deal slips away. It will also mean a lot of yelling, cursing and desk-smacking.

A private equity firm that is set up to recognize the technological needs of an active, multi-location, traveling firm has by definition invested in infrastructure ? assets that are essential to the functioning of the business. A firm that has fails in this regard guarantees that partners and other professionals will spend too much time trying to fix technology problems on the fly. Your partners don't want to spend a lot of money on technology? Ask them this: How much partner time are they willing to have diverted to waiting, scrambling and pleading when they could be sealing deals and adding value?

The April issue of PEI Manager is all about the technology and systems necessary to keep a private equity firm functioning at peak capacity. We define technology and systems broadly ? for example, you'll find on p. 26 Jennifer Harris's description of the many ways CFOs are beginning to log information related to the value of their portfolio companies. These ?systems? range from Word documents to sophisticated databases that automatically connect portfolio metrics with measurements taken from the liquid markets. As FAS 157 becomes gospel throughout private equity, expect to see more interest in automating the valuation process.

Technology doesn't work if humans don't nourish it. That means requiring front-office dealmakers to consistently input their activities into front-office systems. As Rob Kotecki writes on p. 24, one of the best ?carrots? for getting deal pros to feed the front-office database is the fact that these numbers are used to assess individual track records. As everyone knows, a deal pro's individual involvement in a deal determines pay, advancement and can be used as a portable track record should the pro decide to move to another firm, or establish his or her own shop.

Enjoy the issue,

David SnowDavid.s@peimedia.com