Our Delivering on the promise of value creation report explores the changing nature of the levers that are driving value creation and value creation planning in private equity (PE) transactions.

Based on interviews with 120 PE firms and portfolio companies, the study reveals unique insights into the growing focus on value creation, the top strategies used by PE leaders to optimise value creation, and the role of external advisors in supporting the value creation planning process. It also identifies a number of key trends likely to shape value creation over the next few years.

The days of thinking about value creation only after the transaction closes are long gone. Value creation should be a key part of the strategy to build conviction and strengthen your position in a competitive process.

Rajesh Sennik,
Partner, Value Creation Practice Lead,
KPMG in the UK

Earlier, deeper, stronger

The study found that value creation planning is starting earlier, going deeper and having a greater impact on decision-making, with more than 80 percent of respondents actively engaging in value creation at or before making the investment decision.

Only around 10 percent of PE firms feel they have reached full potential 90 percent or more of the time on their investments.

Unfulfilled promise

Despite the growing importance of value creation planning, however, only around 1 in 10 PE firms feel they have reached full potential on 90 percent or more of their investments.

Frequency of investment achieving its full potential

Technology is the golden thread that runs through the life cycle of an investment.

Luke Anderson,
KPMG in the UK

Growing role of tech and digital levers

Although traditional levers of value creation such as buy and build and investing in people and talent still play a big role, respondents expect tech and digital transformation levers to double in importance over the next three years.

ESG is a critical value creation lever that has been growing in importance through time.

Private equity operating team member, US$11-US$50 bn

ESG is becoming an influential part of the decision-making process. Most firms are looking at ESG factors early in the deal process and are prepared to walk away if they give cause for concern. Overall, more than 70 percent of UK PE firms have stepped away from a deal due to ESG concerns, while almost half of PE firms in the US have done the same.

Declining an opportunity becaue of ESG factors

Download the Delivering on the promise of value creation report for more unique insights from the survey and expert commentary from our value creation specialists.