News & Insights

Private equity is scaling. The talent pipeline isn’t.The global PE market has surged from $4.7T in 2021 to a projected $6T in 2024. Operational value creation now drives 47% of returns, up from just 18% in the 1980s. But the supply of qualified operating partners—who turn strategies into EBITDA—isn’t keeping up.

The hardest sell in private equity isn’t to LPs—it’s to your own partnership. While LPs increasingly view sophisticated operating capabilities as table stakes, many senior partners remain skeptical about redirecting 5–20% of management fees toward operating teams. The resistance is visceral: deal partners who built their careers on transactional success see operating resources as cost centers, not investments.

Private equity’s operating model is at a crossroads. With leverage and multiple expansion no longer reliable engines of return, operational value creation has become the industry’s defining competitive lever. Since 2010, operational improvements have accounted for 47% of PE value creation—up from just 18% in the 1980s—while the contribution from financial engineering has fallen to 25%.

Private equity firms that wait until after close to bring in operating partners are systematically destroying value. The evidence is clear: funds that integrate operational due diligence alongside financial DD and build detailed value creation plans pre-LOI achieve IRRs 3.8–4.5 percentage points higher than peers. On a $2 billion fund, that gap translates into $150–250 million in additional value—the difference between top-quartile performance and mediocrity. Yet 62% of firms still treat operations as a post-acquisition exercise rather than a core diligence function.