AI is expected to touch all verticals within financial services, including private equity. 

There are emerging uses of AI in private equity, and like other industries, there is no playbook on how to deploy the technology, Christian Davis, associate partner at commercial data service provider JMAN Group, told Bank Automation News. 

“Some of those use cases certainly lie within some of the more operational components of how private equity funds operate,” Davis said. 

Tawfik Jamjoum, partner at consultancy firm Kearney, agrees. He told BAN PE firms are exploring AI to: 

• Improve internal operations; 

• Accelerate deal sourcing; 

• Streamline deal flow; and  

• Create value in portfolio companies. 

“On the accelerated deal sourcing, AI scans massive datasets, identifies attractive investment targets faster, and reveals underlying trends in markets, industries and companies and AI exposure risks,” Jamjoum said.  

For enhanced due diligence, AI can automate:  

• Analysis of legal, financial, customer and operational data; and 

• Extracting key insights and flagging anomalies much faster than manual review — leading to more accurate, data-driven decisions. 

PE companies can better evaluate their potential investments more quickly with AI, which can aid in increased deal flow, Jamjoum said. 

AI in PE

PE firm West Lane Capital, for example, is “exploring the use of AI as an additional layer of due diligence, particularly for broadly scanning news, court filings and social media for red flags. While it doesn’t replace our teams, it helps us surface risks much faster,” Charles Corpening, chief investment officer at West Lane, told BAN. 

“Our traditional diligence process works well with financial and legal analysis, but where AI adds value is in the gray areas — for example, reputational risks, employee sentiment, or ESG concerns that aren’t in the data room,” Corpening said. 

AI also helps PE firms in benchmarking, Corpening said. 

“It enables us to rapidly compare a target to hundreds of peer companies, which gives us a clearer view into whether we’re looking at a bargain, a premium, or an anomaly,” Corpening said. 

Once a PE firm acquires a business, AI can also help optimize that business, he said. 

“AI can help identify efficiencies in pricing, supply chain or customer churn that wouldn’t necessarily show up in a standard 100-day plan,” he said. “Across the portfolio, AI can help monitor performance in real time so we can act on risks and opportunities earlier.”  

The drawback

While AI can add efficiency to a PE firm, it also threatens the very essence of private equity, Pierre Buhler, managing director of financial services practice at consultancy SSA, told BAN. 

With the advent of AI, startups and existing giants are at risk of losing their moat, Buhler said. “AI can help people create applications from scratch quickly and compete with incumbents,” he added. 

Jamjoum said, “Digital and software PE-backed companies face distinct challenges compared to those focused on physical products. These businesses are vulnerable to disruptions from AI-driven competitors or rapid trend shifts, such as ‘vibe coding’ [AI-assisted software development.]” 

Businesses can suddenly have a lot of competitors or go out of business in a short period of time due to increased competition from AI startups, Buhler said. 

Recent investments in fintechs, AI firms

While AI adoption is increasing at breakneck speed, PE firms are cautiously optimistic when it comes to investing in AI companies, Jamjoum said. 

“PE firms can boost efficiency, reduce risk and create value with AI, but must manage data quality, transparency and rapid change,” he said. “Winners will be those PE firms that combine robust AI playbooks with deep human expertise, clear governance and proactive risk management.” 

As of now, venture capital is playing a role in funding AI startups, but Davis predicts that in the next three to five years PE companies will become more active in funding as AI companies mature and need additional liquidity.   

Recent AI investments from PE firms include: 

• Payments company Dojo secured a $190 million private equity round from Vitruvian Partners in May; 

• AI-driven cloud service provider Sedai secured $20 million in series B funding from PE firm Atlantic Vantage Point, among others in June; and 

• AI-driven chatbot company Hyperbots has raised $6.5 million in funding from PE firm Darashaw and Company in May. 

PE companies are also working with consultants to understand how they can leverage AI and find the right tech partners for their needs, Davis said. 

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