By Paul Francis-Grey
All markets evolve. For private equity, the era of relying primarily on multiple expansion is over; durable value now comes from disciplined, hands‑on value creation. Of their portfolio companies, sponsors are professionalizing finance divisions, creating buy‑and‑build platforms with operational readiness, sharpening commercial engines, and embedding ESG where it drives customer success. This shift is not rhetorical. It is noticeable in how funds structure the first 100 days of a new investment, how they equip management, and which levers they prioritize to grow EBITDA and de‑risk exits.
Finance first
Take the finance function. What was once a back‑office necessity is now a top‑of‑house growth and exit enabler. Accelerating and standardizing the close, harmonizing controls, and elevating variance analysis don’t just save time—they protect asset value and make underwriting easier, stabilizing multiples when markets are choppy. Getting the basics right early, especially post‑acquisition or ahead of bolt‑ons, compounds: platforms that can ingest acquisitions faster and produce reliable data command buyer confidence at exit.
Professionalization before acceleration has become a hallmark of successful early-stage investments, for example. Upgrading the senior bench of a business’ CEO, CFO and CTO, installing or developing finance functions and back-office capabilities and ensuring the foundations of a company are strong enough to support the additional revenue and workload that a private equity investment brings is essential before launching into a buy-and-build strategy.
When foundations are set, integration moves faster, diligence friction falls, and the compounding effect of M&A is captured in EBITDA, not lost in chaos. This operations‑before‑origination mindset has become commonplace. Sponsors that invest early in operating cadence, reporting and leadership readiness are considered best-placed to unlock inorganic growth safely and at pace.
The human touch
Human capital is increasingly treated as a core, measurable driver of value.
Adam Saunders, Founding Partner of head-hunter and executive search firm, Amrop, argues that among the costliest execution risks is mismatched leadership.
It is crucial that conscientiousness, experience and team diversity correlate with performance in privately backed environments. Funds still often under‑invest in leadership diligence, Saunders notes, and become disadvantaged by premature CEO changes and cultural disruption.
Upfront assessments, psychometrics, and coaching that align founder identity with sponsor ambition, prevent value leakage and speed up its strategic plan. In technology and software, the pendulum has swung decisively from velocity to efficiency.
Tim Nixon, CEO Management Consulting at Teneo, observes that top‑line exuberance has given way to multi‑threaded value creation theses: reducing costs, tighter product management, pricing discipline and redesigning operating‑models.
With buyers more skeptical and budgets tighter, value accrues in portfolios that can prove ROI quickly with fewer people and redeploy savings into the areas that matter.
Often with AI and automation compressing development costs and cycle times. EBITDA growth now flows as much from refined product and go-to-market discipline as it does from raw expansion.
UK SME investor, YFM’s approach commits this via “value creation pillars” including talent, ESG, and revenue operations, embedded across the hold period. Revenue operations diagnostics, ideal customer profiling, and pipeline rigor create near‑term lift without over‑engineering organizations. While specialist value creation teams are becoming increasingly commonplace within private equity houses, external experts are often pulled in selectively to accelerate change, while maintaining the company founder’s input and buy‑in.
Buy‑and‑build, built for today’s lenders
Debt providers have adapted to the new reality by tailoring facilities to rolling M&A programmes in fragmented markets.
As Tom Chappell at private credit investor, TDC, explains, flexible packages that scale with earnings and avoid rigid leverage formulas allow platforms to pursue both large transformational deals and steady bolt-ons.
This is especially so in professional services such as IFAs and accountancy firms.
Sponsors that pair sensible gearing with seasoned M&A muscle capture roll‑up economics without stressing the balance sheet, reinforcing value creation through steady EBITDA expansion.
ESG moves revenue, not just risk
The conversation surrounding ESG has matured from once being centred on compliance to cashflow. Private equity house Palatine has built its investment strategy on sustainability. The sponsor’s website proudly declares how ESG is in its DNA, stressing how “commercial ambitions and a conscience are good bedfellows” and is recognised for its approach to ESG considerations across its business and investments. “The proactive management of ESG results in positive and inclusive company cultures with higher employee engagement and productivity as well as better financial returns,” it claims. In short, ESG initiatives that align with customer need and data transparency drive top‑line resilience and pricing power, turning ESG into a P&L‑relevant value creation tool.
Playing by the book
While value creation playbooks differ from private equity house to private equity house, common themes appear. These include building finance functions as a strategic platform, which help close acceleration, controls, and portfolio‑wide standardisation for faster bolt‑ons and exit‑ready data rooms; professionalizing leadership early; institutionalizing commercial excellence through product discipline, pricing, and revenue operation frameworks that create repeatable pipeline and efficient conversion; acquiring lender‑friendly bolt-ons with flexible debt that scales with earnings and supports both transformational deals and serial tuck‑ins; making ESG monetizable by establishing targets, data, and programmes that secure revenue and pricing in procurement‑driven markets. And pursuing proprietary, patient growth through moderate leverage, active integration and internationalization. In short, 2025’s private equity practitioners are winning not by hoping the market re‑rates their assets, but by making those assets undeniably better. When finance is fast and clean, leadership is fit‑for‑purpose, commercial engines hum, and sector choices reward quality, EBITDA grows in ways buyers can verify. That is why value creation is no longer a slogan, but the essential operating system of private equity today.
