How Private Equity Firms Use AI for Government Market Intelligence [Case Study]

In our previous articles, we explored why government market diligence is broken and how AI can transform government market analysis. Now, let’s look at how private equity (PE) firms are applying AI-powered government market intelligence solutions in real investment scenarios. 

The Capital Allocation Challenge in Government Markets

Deploying capital into the $7 trillion government supply chain should be straightforward. Instead, investors face three persistent barriers:

1. Fragmented data: Market information is scattered across a sea of sources, making it difficult to identify and understand true opportunities.
   
   
2. Slow, incomplete diligence: Weeks of manual research still only produce patchy intelligence and speculative forecasts.
   
   
3. Poor visibility into timing: Without clarity on procurement cycles, budget flows, and appropriations, investors risk missing market windows.

These inefficiencies often push PE firms to avoid the government sector or to accept lower returns on deals executed with incomplete information.

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Real-World Application: A PE Firm’s Defense Contractor Acquisition

From screening to final investment decision, here’s how a PE firm uses an AI-powered solution to evaluate a defense contractor acquisition.

Phase 1: Initial Screening & Opportunity Sizing

• The challenge: Limited public information makes it hard to size the market and validate demand.
  

• The AI solution: In minutes, the platform delivers:
  
  • Market sizing and segmentation across agencies
  • Historical award records with values and duration
  • Total addressable market (TAM) by core competencies
  • Competitive intensity analysis
  • Contract waterfall projecting 3–7 years of revenue visibility
    
• The outcome: The firm quickly confirms whether the target market is large and predictable enough to merit deeper diligence which saves weeks of research.
  
  

Phase 2: Uncovering Operational Efficiency

• The challenge: Determining whether margins can be improved or sustained.
  

• The AI solution: Analysis of the contractor’s portfolio highlights:
  
  • Profitability patterns across contract types
  • Margin expansion opportunities via customer analytics and contract mix optimization
  • Revenue-per-employee (RPE) benchmarks vs. industry peers‍
• The outcome: The firm uncovers specific levers to improve margins, strengthening its valuation model and investment thesis.
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Phase 3: Assessing Revenue Sustainability & Risk

• The challenge: Avoiding “revenue cliffs” from contract expirations with no clear renewal plan.
  

• The AI solution: Comprehensive risk diagnostics including:
  
  • Competitive positioning for upcoming recompetes
  • Contract expiration mapping over 12–36 months
  • Historical recompete win rates
    
• The outcome: The firm quantifies revenue risk and decides whether it is manageable post-acquisition or a deal breaker.
  
  

Phase 4: Validating Growth Strategies

• The challenge: Ensuring growth projections align with market realities.
  

• The AI solution: Market capture analysis shows:
  
  • Adjacent agency and whitespace opportunities
  • Capability-to-demand matching with upcoming government needs
  • Alignment of funding priorities with Congressional committees
  • Benchmarks of competitor expansion attempts
    
• The outcome: The firm validates or revises financial projections with confidence grounded in market evidence.

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The Competitive Advantage

Private equity firms using HighGround can evaluate government contractor acquisitions in hours instead of weeks while uncovering revenue sustainability risks, portfolio vulnerabilities, and market expansion opportunities invisible to competitors. This intelligence advantage enables faster deal execution with higher conviction and better risk-adjusted returns.

Ready to see how AI-powered government market intelligence can sharpen your investment process? Schedule a demo to explore these capabilities.