SOC Reporting for Private Equity-Owned Companies
Published on by Myles Wallace in SOC Reports
While SOC reports have traditionally been driven by customer contractual requirements, the landscape is changing. Private equity (PE) firms are emerging as powerful drivers, pushing their portfolio companies toward SOC compliance. This trend is most prevalent in financial services, technology, and healthcare—industries where trust and security are critical.
Why private equity is embracing SOC 2
PE firms have a strong presence in startup investments, which is a major driver behind the push for SOC reporting. Many startups quickly find themselves serving clients that require SOC reports as part of vendor due diligence. As they grow, larger customers in regulated industries require assurance over a service provider’s control environment, so SOC reports can help with sales.
For PE firms, SOC reports are about value, not just compliance. A SOC 2 report provides independent, third-party assurance over a company’s control environment. While PE firms are primarily focused on financial performance, SOC reporting adds credibility and confidence for current and prospective clients, and that assurance can become a competitive advantage for portfolio companies and ultimately help drive higher valuations.
Build market credibility
A SOC report signals maturity, reliability, and commitment to security and compliance. That’s why it can be a differentiator when a portfolio company goes to market. For PE-backed startups, this credibility can be critical when preparing for a strategic sale, courting larger clients, or attracting additional investment.
Align across the portfolio
A key to success in SOC reporting for PE-owned companies is strong communication among all parties: the portfolio company (service organization), the PE firm, and the reporting partner. A strong reporting partner ensures every stakeholder understands the process, requirements, and outcomes.
When multiple portfolio companies are undergoing SOC examinations, consistency matters. When oversight practices, risk-management approaches, and governance structures are aligned across the portfolio, it can create enormous efficiencies – and the result is a smoother, more efficient process for both the PE firm and its portfolio companies.
Standardize for efficiency
SOC reporting becomes much more straightforward when a PE firm has strong oversight of its portfolio companies. Shared policies, standardized controls, and centralized governance can streamline the audit process, saving time, energy, and resources. On the other hand, if each entity operates independently, the process can vary widely, requiring more customization and potentially more effort to complete.
Next steps
Ready to strengthen your SOC reporting strategy? Contact us today to schedule a free consultation with one of our SOC pros and take advantage of our SOC Readiness assessment. You can also explore our SOC Reports FAQ and our on-demand video series on DIY SOC reporting for even more insights. As always, we’re here to help.
