Today’s private equity sector is thriving, but that doesn’t mean that firms have stopped working to develop new competitive advantages. Many such efforts focus on how firms can cut costs or enhance returns, but another avenue firms should consider involves taking advantage of the breadth of raw data available online to strengthen and streamline their due diligence processes. As a recent Forbes article points out, this data can help private equity firms “increase the speed and reliability of insights” that shape their decision making and make it easy to determine prices for various assets.

Incorporating digital data mining into due diligence is part of a broader trend of digitalization in the private equity and financial services industries. Firms have availed themselves of a wider range of digital tools and technologies to improve outcomes and entice customers while also increasing their own efficiency. For example, as the Forbes article indicates, in the case of due diligence, the labor intensive and time consuming process of identifying and analyzing a firm’s strengths and weaknesses can now be completed within a few days using data easily obtained via the internet, which saves firms time and money.

There are a number of specific areas where digital data can offer private equity firms important insights. By studying online customer reviews, a private equity firm could learn more about a target company’s products or services, its relationships and standings relative to competitors, and more. Additionally, the authors of the article–all of whom are leaders of Bain & Company’s private equity practice–discuss an example where they “combined online data with store visit observations for the potential buyer” during their due diligence of a sporting goods retailer to evaluate the efficacy of the company’s organizational structure; they found that, in comparison with other firms in the industry, the retailer in question had a larger proportion of managers and support staff than store employees.

Data mining can also improve outcomes for due diligence by analyzing relevant social media posts from customers, e-commerce data, geographic presence, and more.

This approach is not without its limits, however. Analyzing such large data sets could require firms to acquire new software that can process the sheer volume of information. Furthermore, this practice would not replace traditional methods of due diligence like customer surveys. But for firms that are looking to make digitalization a competitive advantage, the Forbes article offers a promising path forward by proposing data mining as part of enhanced due diligence efforts in the world of private equity.