Private Equity Insights

We spent the last 3 months researching how PE firms create value 🌱 The result: “The Private Equity Value Creation Report” — one of the most in-depth studies on the topic, based on the data from over 10,000 PE entries and exits globally. 𝟳 𝗸𝗲𝘆 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀: 1️⃣ Revenue growth is the largest driver of PE value creation On average, it contributes to 54% of value creation. Recently, revenue growth has become an even more critical driver of success (as multiples have come down), contributing to ~65-70% of value creation in the last 2 years. 2️⃣ Margin expansion plays a smaller role at 15% Margin expansion is most impactful when PE firms target operationally challenged businesses rather than already-efficient businesses. 78% of deals with negative EBITDA margins achieved margin expansion (median +1250bps), while businesses with high EBITDA margins (>30%) typically saw margin contraction. 3️⃣ Multiple expansion contributes significantly at 32% For the top quartile deals, its contribution is even higher at 40%.  By sector, TMT, Science & Health, and Services see the largest multiple expansion. Consumer and Industrials see the least. By size, multiple expansion is the highest for smaller deals under $100M EV. 4️⃣ Growth amplifies all other PE value creation drivers Growing companies benefit from operating leverage and are more likely to achieve margin expansion. 58% of growing firms expand margins compared to 44% of those with negative growth. Higher-growth companies also typically command 30–50% higher multiples at exit. 5️⃣ Top and bottom-performing deals are held the longest Investors hold onto the best-performing assets for greater upside but also hold the worst, trying to fix the business. Assets held in the 3-6 year range tend to cluster around more predictable, moderate returns. 6️⃣ Buy-and-build is central to PE value creation When done right, buy-and-build bolsters all three value creation drivers: revenue growth, margin expansion, and multiple expansion. Buy-and-build works at any size, but the uplift is strongest in small platforms. The multiple arbitrage strategy still works with add-ons trading at a 20% discount to platforms. 7️⃣ Larger deals drive more margin expansion Large businesses ($1bn+ EV) and public-to-private deals, on average, deliver more margin expansion. Smaller businesses, on the other hand, rely more on growth and multiple expansion to drive returns. Given the smaller size, returns on average, are also higher for family-to-sponsor deals. _______ 𝗙𝘂𝗹𝗹 𝗥𝗲𝗽𝗼𝗿𝘁 Don’t miss out on insights: 💡 By Sector 💡 By Deal Type and Size 💡 MOICs and Loss rates + 5 case studies and 43 charts. Get it here ➡️ https://lnkd.in/d9Z3kubU (E-mail required) #ValueCreation #Growth #PrivateEquity

Private Thoughts From My Desk ……………. #33 𝐓𝐚𝐫𝐢𝐟𝐟𝐬 & 𝐔𝐧𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐲: 𝐖𝐡𝐚𝐭 𝐈𝐭 𝐌𝐞𝐚𝐧𝐬 𝐟𝐨𝐫 𝐏𝐄 𝐑𝐢𝐠𝐡𝐭 𝐍𝐨𝐰 After five years of what I can only describe as "unique disruptions"—a global pandemic, unprecedented inflation, interest rate shocks—we now face yet another: a new wave of tariffs. For private equity, the impact of these policy moves isn’t just about the numbers—it’s about the uncertainty they inject into long-term models. Private equity lives and dies by its ability to predict the future—five years at a time, with leverage. So when policy shifts like these arrive without clear direction or a timeline, deal pipelines stall. It’s not that the tariffs themselves are necessarily fatal—it’s that no one knows what game we’re playing, or how the rules might change again next quarter. We entered 2025 with momentum. Intermediaries were busy, due diligence was in high gear, portfolio companies were readying for exit. But in February, the “T word” started surfacing. Tariffs are just another word for uncertainty—what I call the dreaded “U word” in private equity—and everything slowed. Activity now reflects what we’re hearing every day: it’s hard to make long-term bets when you don’t know what to model in the short term. For LPs, the liquidity crunch is especially acute. Liquidity is at levels we haven’t seen since the Great Recession. Many LPs are rebalancing through secondaries; some are exploring NAV loans and other creative strategies. The ones with dry powder—sovereign wealth funds, select family offices—see dislocation as opportunity. But for most, frustration is mounting. Fundraising is feeling the pinch, see the chart below for buyout fundraising trends. Exit activity is a leading indicator—and right now, that indicator is flashing yellow. Fundraising was always going to be challenged in 2025. Now, recovery may be deferred even further. So what can GPs do? It’s back to basics (again) with portfolio companies: secure the balance sheet, conserve cash, and avoid covenant or financing issues in the near term. There’s also renewed urgency to get EBITDA up—quickly—through pricing, cost reduction, and working capital optimization. Anything that opens the door to a liquidity event in the near term. This is also a time for firms to solidify their long-term strategy. Some are asking whether it’s time to double down on what they do best and exit non-core strategies. Consolidation is no longer theoretical—it’s a daily conversation, especially for firms caught in the increasingly challenging middle market. This isn’t a crisis. But it is a moment of reckoning. In a market defined by scarcer capital, talent, and investment opportunities—not everyone wins. Knowing what you do best, doubling down on it, and charting a clear path forward for your firm are more essential than ever. #privateequity #privatemarkets #privatethoughtsfrommydesk

The Army Just Launched FUZE. A $750M Annual VC Fund for Defense Startups. Secretary Dan Driscoll unveiled the Army's new venture capital model at the Demand Signal Forum in Arlington. Former private equity exec turned Army Secretary just flipped the acquisition playbook. FUZE channels $750M annually into nontraditional contractors. The man behind it? Driscoll ran a $200M VC fund before taking office. Iraq veteran with 10th Mountain Division. Yale Law grad. Sworn in by VP Vance in February. He calls traditional acquisition a "calcified bureaucracy" and he's not wrong. How it works. • Scout external tech, not internal solutions • Live pitch events starting October at AUSA • Other Transactional Authorities for rapid contracts • "Colorless money" flexible funding across programs First targets. • Counter-drone systems (interceptors, jammers) • Electronic warfare for spectrum dominance • Energy resilience (batteries for -40°F operations) • AI-driven autonomy and command systems Two prizes already announced. • $500K for emerging tech (October 2025) • $2.5M for counterstrike capabilities with U.S. Army Europe The shift is stark. Traditional acquisition takes 10+ years. FUZE promises prototypes to programs of record in months. Army labs and 75th Innovation Command vet the tech. Winners scale to production. Critics worry about over-focusing on tech while recruiting struggles. But Ukraine proved agile beats legacy. When commercial drones outpace billion-dollar programs, the model needs disruption. Three ways in. • SBIR/STTR grants for early stage • xTech challenges for specific problems • Direct pitches at AUSA mid-October Startups like Anduril benefit. Legacy primes lose their moat. The Army's telling innovators "we're open for business." Is your tech ready for a VC-style pitch to the Pentagon?

Family Offices Are Prioritizing Private Equity Over Public Equities and here's why! In recent years, Family Offices have increasingly shifted their focus from public equities to private equity investments. This transition underscores a strategic pursuit of higher returns and better risk management. This article explores the reasons behind this shift, leveraging data from a comprehensive study on long-term private equity performance by state pension systems from 2000 to 2023. According to a study led by Stephen L. Nesbitt, CEO and CIO of Cliffwater, private equity investments have demonstrated robust performance over the past two decades. State pensions focusing on private equity garnered an 11.0% net-of-fee annualized return over the 23-year period ending June 30, 2023, significantly outpacing the 6.2% return from public stocks. This substantial difference of 4.8% annualized underscores the potential for higher returns in private equity, a factor increasingly recognized by Family Offices. Despite facing a challenging year in 2023 with a modest 0.8% return due to spillovers from public equity drawdowns in 2022, private equity has shown resilience when viewed over longer periods. Over the two years prior, private equity still achieved a commendable 10.3% annual return, starkly contrasting with the near-flat 0.2% for public stocks. This resilience in turbulent times adds to the allure of private equity for Family Offices seeking stable, long-term growth. The study, which analyzed returns across three market cycles including both bear and bull markets, shows that private equity not only survived but thrived across various economic conditions. This consistent performance is attributed to private equity's capability to leverage deep market insights and operational improvements in portfolio companies, factors often absent in public equity markets. A crucial aspect of private equity is the 'liquidity premium'—the additional return investors demand for the decreased liquidity compared to public equities. Historically, this premium has been estimated at around two percentage points. Family offices, with their longer investment horizons and lower liquidity needs, are particularly well-positioned to capitalize on this premium, enhancing their portfolios' overall return potential. The strategic pivot by Family Offices towards private equity is not merely a trend but a calculated shift based on empirical evidence and the pursuit of superior risk-adjusted returns. The data vividly demonstrates the advantage of private equity in achieving higher long-term returns and managing risks effectively, even in fluctuating market conditions. As such, private equity is likely to remain a cornerstone of investment strategies for Family Offices, promising both growth and stability in the investment landscape of the future. Data and research by: Stephen L. Nesbitt – Chief Executive Officer, Chief Investment Officer of Cliffwater #privateequity #familyoffice

The era of sleepy due diligence is ending. Private Equity funds are growing weary of templated reports from the major firms: the ones that recycle management interviews, pull historic industry data, and call it “insight.” We’re increasingly being passed these documents on Professional Services deals, and what stands out is how completely they miss the human factors that actually determine deal success. In this sector, people are the value. Yet most diligence still ignores culture, sentiment, and talent risk, the variables that dictate whether a platform scales or fractures post-close. Attrition risk, hiring friction, and cultural misalignment are no longer soft factors; they’re measurable indicators of future performance. What’s becoming clear is that the primary research layer of diligence has been commoditised. Interview scripts, market soundings, and Excel-based “synergy models” now look outdated in a world where AI can replicate that work in hours. The real differentiation comes from live data, capturing what people inside and around a business actually think and feel in the current moment. When we run cultural and talent diagnostics for PE funds, pre- and post-deal, the results are often eye-opening. Sub-scale acquisitions with no integration intent. Poorly defined Partner value propositions. Silent churn of high-performers that never shows up in a data room. These aren’t theoretical risks, they’re deal-value killers. Because in Professional Services, the biggest risk in your deal isn’t financial. It’s human.

🌍 As private equity firms manage trillions of dollars globally, how do they communicate their sustainability efforts? More importantly, do their disclosures actually reflect tangible environmental and social impacts? These critical questions are tackled in a new study by Jefferson Kaduvinal Abraham, Marcel Olbert, and Florin V. titled "ESG Disclosures in the Private Equity Industry, published in the Journal of Accounting Research (2024). This terrific paper systematically examines how private equity (PE) firms report on environmental, social, and governance (ESG) practices and whether these reports align with real outcomes. Here are the key findings: 1️⃣ Growing ESG Transparency: Using data from 5,468 PE firms between 2000 and 2022, the paper shows a significant increase in voluntary ESG disclosures on firms' websites, particularly after 2011. PE firms are increasingly discussing social and environmental issues alongside governance, with social topics recently surpassing environmental ones. 2️⃣ Demand from Investors: The paper finds that fund investors (Limited Partners, LPs) with ESG preferences are a major driver of increased disclosures. When PE firms raise capital, ESG transparency spikes, especially from firms aiming to attract LPs with strong sustainability commitments. 3️⃣ Positive ESG Outcomes: PE firms that disclose more ESG information also tend to have better ESG performance in their portfolio companies. For example, companies acquired by PE firms with high environmental disclosures saw reductions in emissions and chemical releases of up to 26%. 4️⃣ ESG Outcomes: The study shows that PE firms with more comprehensive ESG disclosures tend to deliver stronger outcomes, suggesting that these disclosures are credible and not merely for appearance, despite concerns about greenwashing in the industry. 📊 Implications: The authors highlight several important implications of their findings. For investors, the research underscores the value of scrutinizing ESG disclosures when allocating capital, as these disclosures are linked to real-world performance. For regulators, the study provides evidence supporting the case for more standardized ESG reporting requirements across the private equity sector. This could help mitigate the risks of greenwashing while promoting genuine improvements in sustainability practices across portfolio companies. 🌱 As ESG issues become more central to private capital, these findings are critical for investors and regulators alike. This important piece of research underscores the need for transparent and reliable ESG reporting, not just to attract capital, but also to drive real-world improvements in sustainability. #ESG #PrivateEquity #Sustainability #CorporateTransparency #ResponsibleInvesting 📖 Read the full paper here: https://lnkd.in/eNKAMqqM

Transactions for a variety of assets are at historically low levels. That could be a sign of potential trouble. Price is a function of both demand and supply. When the value of something declines, say because of a sharp increase in borrowing costs, often the holders of those assets don't like the price they get offered (they still think it's "worth" what it was at the peak, eg when interest rates were very low). So unless they are forced to sell, many of them just refuse to sell at the price it would take to sell. That tends to lead to a sharp fall in transactions/sales/deals. If the number of transactions decline, the supply declines and so prices can remain higher than they would be if transactions were at more normal levels. Often, eventually, more people are forced to sell (eg because they can't afford the higher interest payments any longer/ to refinance their debt or because their income declines, eg during a recession). Interest rates also tend to fall during recessions but the key question then is the extent to which lower interest rates offset weaker incomes. So I look at transaction volumes as a potential warning sign for where prices could come under pressure if transactions return to more normal levels. Where are transaction volumes currently weak? The charts below highlight a few areas for consideration: Home sales, office sales, Private Equity and Venture Capital distributions/ IPO volumes/ Leveraged Buy Out (LBO) deals. Some of the charts hopefully speak for themselves but a few notes: Slide 5 shows PE and VC funds are distributing less to their investors. Continuation funds are growing, these are when Private Equity funds transfer assets from one fund they control to another fund they control. This can be an attractive option if they can't sell the asset(s) at valuations that they or their investors would be happy with. Slide 6 shows an estimate of the potential mismatch between the holding valuations of some private equity assets vs recent transactions in the same sectors (from McKinsey's Global Private Markets Report 2025). Some private credit loans finance private equity backed companies. When rates rose in 2022, LBO deals collapsed (slide 4) but the share that were backed by private credit increased (LHS of slide 10). The RHS of slide 10 shows that the proportion of privately rated private credit assets being rated by smaller ratings agencies has increased dramatically in recent years. I would highly recommend you read the recent Bloomberg article titled "A new ratings game, 3000 deals, 20 analysts, lots of questions". Let me know if you would like a link to it. Toby Nangle's "inside the private equity-insurance nexus" is also an important read in the FT. If someone wants to sell you something where transactions have dried up, make sure you do your homework. And if something is on offer at a "discount" or a high yield, again do your homework. Many of the charts are from the JPM "Guide to Alternatives".

Think a cash injection from a Private Equity(PE) sponsor is a guaranteed lifeline for a borrower facing imminent default? Think again. New data reveals that for troubled companies, it’s often a high-stakes gamble—and over 33% of the time, it fails. A new S&P Global report dives into the world of"middle-market distress." Since 2020, PE firms have injected $2.5 billion into 165 of their struggling portfolio companies. But here’s the interesting part: 37% of these companies defaulted anyway. This isn't just about companies failing; it's about sponsors strategically "doubling down" on bad bets, calculating that the potential return on new capital is worth the risk. Let’s simplify this. Imagine you own a restaurant that's losing money. You have two choices: 1. Walk away and close it (the default). 2. Invest more money to renovate, change the menu, and try to turn it around. PE firms are increasingly choosing option #2. But S&P found that even after that new investment, 37 out of 100 restaurants still end up closing. That’s a huge risk. What happened to the other 63%? ✅ 23% improved enough to get to a slightly safer footing (moving into a 'B-' credit estimate). 🟡 40% remained in the "CCC" danger zone—still deeply distressed and at high risk of future default. Why would a PE firm do this? They’re weighing everything: how much they’ve already invested, lender relationships, reputational risk, and the hope that seven more months of runway (the average extension) is enough to navigate a tough market. This isn't just a PE problem. This trend also affects: ➡️ Lenders & Banks: Their risk models need to account for the fact that a sponsor bailout doesn't eliminate default risk. ➡️ The Broader Economy: With over 500 middle-market companies ($150B+ debt) currently in this distressed zone, the decisions made in boardrooms have ripple effects. A sponsor cash infusion is a tactical move to buy time, not a magic cure. As S&P notes, it rarely fixes the core debt-servicing problems long-term. In a period of high rates and economic uncertainty, the line between a rescue and a rinse-repeat investment is thinner than ever. Krishank Parekh | LinkedIn #PrivateEquity #CreditRisk #DistressedDebt #Finance #Economy #MiddleMarket #Investing #FinancialAnalysis

Everyone loves to talk about the strategy behind M&A deals. But the thing I’ve learned watching FMCG leaders up close? Deals don’t fail because of bad strategy. They fail because of people. It’s never the financial model that breaks first — it’s leadership misalignment. I see it happen all the time in FMCG — especially in Private Equity backed environments. The model looks perfect on paper: → Acquire a few fast-growing brands → Roll them into a global portfolio → Drive efficiencies, cost synergies, market expansion But then the integration starts — and suddenly things look very different. Because what the spreadsheet doesn’t tell you is: → The founder isn’t used to quarterly board meetings with EBITDA pressure → The CMO is still running a startup playbook in a scaled organization → The CEO doesn’t align with the go-to-market model in a new geography → The commercial leaders can’t navigate two different company cultures merging overnight And this happens more than most will admit. In fact — Bain & Company data shows 70% of M&A deals underperform expectations. And culture is one of the top 3 reasons. In the FMCG space — where brands carry legacy pride and deeply embedded ways of working — leadership integration is no longer “important.” It’s non-negotiable. Great M&A outcomes today don’t just come from smart strategy. They come from: → Leadership teams that trust each other faster than the market moves → Leaders who can flex between entrepreneurial scrappiness and corporate discipline → People who know when to protect brand identity — and when to evolve it And here’s what I tell my clients: If leadership alignment is not your #1 risk mitigation strategy in M&A — you’re not just betting on growth. You’re betting on luck. The smartest investors I work with in FMCG? They’ve learned this the hard way. They’re doing culture diligence as seriously as financial diligence. They’re assessing leadership “integration readiness” before the deal closes. They’re hiring talent not just for operational excellence — but for the ability to navigate ambiguity, pressure, and transformation. Because the future of FMCG M&A won’t be won by the best strategy. It will be won by the best people. Drop me a message — I’m always up for a conversation on building high performing teams. #FMCG #ExecutiveSearch #PrivateEquity #MergersAndAcquisitions #Leadership #CultureIntegration #ConsumerGoods #HiringStrategy

Rising discretionary spending among millennials and Gen Z and shifting consumption patterns are driving private equity interest in India’s food and beverage (F&B) sector, Jyoti Banthia reports for businessline. Quick commerce-driven scalability is also accelerating this trend. In 2025, Temasek, IHC, and Alpha Wave Global acquired minority stakes in Haldiram Snacks Food, and ChrysCapital took a controlling stake in Theobroma Foods. Devyani International, meanwhile, obtained a majority stake in Sky Gate Hospitality this year. “Quick commerce has fundamentally changed the game for F&B in India. Distribution used to be the hardest, slowest part — now brands can launch, test, and scale in months, not years,” says Arjun Anand, Managing Director and Head of Asia at Verlinvest. Underlining behavioural changes among consumers and how that creates new brand-building opportunities, Anand adds that millennials and Gen Z are “digitally native, ingredient-aware, and willing to pay for premium.” “As private equity investors, our focus is on identifying category leaders that can grow at 1.5 to two times the industry average,” C.K. Israni Group’s Chandni Nath Israni shares, highlighting the scalability aspect among homegrown brands. ➡️ How will evolving consumer needs reshape the F&B landscape in India? Share your thoughts in the comments. Source: businessline: https://lnkd.in/gY4A62Xt ✍: Dipal Desai 📸: Getty Images #foodandbeverage