Can you trust the numbers?

I broached the topic of manual errors that creep in when you rely on old ways of working and it got me thinking that the subject merits some further exploration.

The old workhorses Excel and Word simply do not fit well to a world where you have multiple contributors to a document. In a private equity transaction context there are several examples of documents like this that rely on contributions from a big group of people some what simultaneously including cap tables, waterfalls, funds flows and many more. The way in which this is solved today is that the documents get passed between all the contributors – most often via email – in versions where the labelling leaves a lot to be desired (question: tell me which is the most up to date version out of these two: “Project Thunder MIP Overview v34.1 vAG VF.xslx” or “ProjectThunder MIP Overview v34.2 vAG.xslx”). Needless to say this is not fool proof. The chain of custody over email is equally terrible and the problem grows exponentially with time as people come and go, memories fade and email inboxes are archived or deleted. Sadly there is no way of tracking changes intelligently in Excel, not that it would necessarily solve much of the problem. It might not come as a huge surprise then that many of my former peers and I have had to spend countless hours reconciling and proofing data by going over, again and again, the same excel and sifting through old email chains to find out where a certain data point came from. Often with tight deadlines in the middle of the night.

In light of the above, it is shocking to think how many millions, and billions, of euros and dollars in money movements are reliant on these outdated processes. What I have described above is the backbone of a private equity transaction and we’re using tools and methods which leave us completely open to very serious mistakes, or worse, fraud. And trust me, mistakes do in fact happen, as does fraud. They are rarely talked about in the open but rather swept under the rug as a “one off”. Over the yearsI’ve seen a few first-hand including, incorrect amounts being transferred and sometimes to the wrong person or entity as a result of human error. I have also witnessed malicious “man in the middle” attacks on people’s emails where many millions of euros were wired to the thief’s account in Asia. As deals get bigger and more complex, and as the cyber threats are multiplying quickly, these problems is only going to grow in size over time. Unfortunately, the existing methods are not evolving to keep pace with the problem.

At DealStack we believe it is possible to find a better way of working. Our vision is to tie together the various stakeholders in a private equity transaction on one tailor-made platform that will create a perfect record of the history of a deal across its lifecycle. It will stand up to the test of team members leaving and being replaced by new people, provide a full audit trail of every data point used and do this in away that doesn’t leave openings for fraudsters.

So to end on a cliché quote, Steve Jobs said that “the best way to predict the future is to invent it”. I’m predicting there’s a system called DealStack which is launching soon that will address all of these challenges and which will quickly become the industry standard. I believe that within a few years this blog post will feel as antiquated as the methods it describes.

It is shocking to think how many millions, and billions, of euros and dollars in money movements are reliant on these outdated processes.