Some private equity and venture capital firms are beginning to explore intangible asset valuations, but experts suggest that advisors are still behind the curve when it comes to CRM for financial services.

Basing valuations on assets rather than profit and loss still is not mainstream, but the idea behind this approach is to find hidden value in proprietary data, intellectual property, business methodology, channels, brands or other assets.

Although customer relationship management (CRM) software has been around for a while, modern CRMs enable intense data mining and engagement statistics, which can help with this mindset.

Well-defined processes and modern cloud-based CRM tools can also unlock significant hidden value in proprietary data, according to Cloud9 Insight CEO Carlene Jackson.

M&A financial services CRM mergers acquisitions cloud9 insight database client relationships Microsoft Dynamics 365

How does CRM work?

Modern CRMs can provide a good understanding of who a company’s clients are and how they work, which is particularly important when deals are based on cross-selling and upselling.

These tools can also be used to protect value if there is a cultural misalignment in a post-deal integration, with many employees leaving. This can destroy value for the merged entity unless CRM data and work on processes has been collected systematically.

CRM for Financial Services

So far, only about one-fifth of PEs and VCs engage with CRM software in a systematic way, with law firms in particular tending to be late adaptors to the use of cloud-based CRM tools as a way of building and protecting value during deals.

The key to modern CRM systems is the ability to understand the lifetime value of each customer. Customer lifetime value is typically calculated by estimating lifetime spend and deducting the cost of gaining or retaining a customer.

Customers often ask for a single view of their CRM data, and while that can be useful, getting insights from the data to make marketing relevant is particularly important. Modern CRM systems can be set up to provide real-time business intelligence.

Cloud9 Insight edit from Rupert Cocke’s article in MergerMarket (July 2020)

Struggling to get a grip on your client relationships?

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