Integrated Business Management Platforms: A Renewed Wave of PE Investor Momentum

Providers are evolving and broadening their capabilities to cater to the shifting needs of merchants and their end-customer, thereby providing continued growth opportunities for these providers. For example, integrated business platforms are increasingly offering value-added financial services such as lending, payroll, and corporate or virtual cards to help address customers’ capital needs. These providers are also embedding accounting capabilities to further enhance the functionality and value proposition. 

As the customer base of merchants becomes increasingly digital and tech-savvy, providers are developing omnichannel solutions that unify in-store, online, and mobile experiences. This provides customers with a seamless journey across various channels. Likewise, these platforms need to guarantee payment flexibility by accommodating a wide range of payment options across traditional, alternative, and mobile platforms.

As merchants expand globally, the demand for facilitating international payments is growing. This includes accepting transactions in multiple currencies and complying with international payment regulations. 

Finally, payment solutions are incorporating AI into their solutions to improve user experience and automate processes. For example, AI can be leveraged to enhance merchant onboarding, end-customer communication and engagement, as well as demand forecasting.

When evaluating investment opportunities, it’s vital to pinpoint those platforms that have carved out a strategic advantage or ‘entry point’. This often begins with a key service, such as payment solutions, in a specific vertical. This approach enables providers to gain a solid foothold within their customer base, and over time, expand their capabilities to include other financial services and software functionality, further integrating seamlessly into customers’ workflows and operations. 

A case in point is Toast’s product evolution. The company has transitioned from a restaurant POS system to a comprehensive product suite encompassing operations, online ordering, delivery, and marketing, eventually becoming a platform and operating system for the restaurant industry. Toast can continue to harness its platform to deliver value to its customers. However, Toast isn’t alone in this regard. Both ServiceTitan and Zenoti have shown their capability to build a platform within their respective end-markets (these are not the only examples, as other companies are also successfully creating operating systems in various industries). 

As demonstrated by these companies, this strategy not only gives a competitive advantage but also lays a solid foundation for sustained long-term growth.

The ongoing evolution and expansion of integrated business management solutions presents a variety of options to investors. As the U.S. market matures, several providers have entered the public markets. As some companies’ valuations remain under pressure, there may still be potential for privatization. 

Investors must also refine their strategies to spot the next wave of emerging companies. This strategic pivot necessitates a deep understanding of market trends and the ability to identify future niche sector leaders, demanding investors to stay updated and adaptable in their investment approach. 

Investors stand to gain by identifying niche markets that are quickly adopting business management platforms and may be ready for consolidation. Additionally, investors might explore the possibility of aggregating and consolidating multiple assets in attractive end-markets or verticals to achieve greater scale. 

Lastly, successful investment strategies in the U.S. may also be applicable internationally. The European market is earlier in its stage of development compared to the U.S. market and presents opportunities for growth. The ability to scale internationally will be an important investment consideration for all assets.