News & Insights

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.

The most potent competitive edge in private equity isn’t a proprietary deal network—it’s preemptive, precision talent placement. Top firms are embedding talent partners with executive search backgrounds to build institutional advantage across funds.

Private equity firms spend millions on procurement, digital, pricing, and operations—but underinvest in the one function that makes or breaks these initiatives: talent management.