Transforming value creation in private equity

Private equity (PE) has long been associated with strategic investment and transformative business growth. Traditionally, value creation in PE relied on selecting the right assets, leveraging financial engineering, and capitalizing on favorable market conditions. However, the landscape has shifted. Today, PE firms face a new reality shaped by normalized interest rates, persistent inflation, geopolitical volatility, and rapid technological change. The old levers—financial leverage, multiple expansion, and international roll-up—no longer consistently deliver the returns investors expect. As a result, PE leaders must embrace a more structured, data-driven approach to unlock operational alpha and deliver sustainable value.

The State of Private Equity: Challenges and Opportunities

Fundraising has contracted, exits have slowed, and median holding periods now exceed six years. With trillions of assets stuck in the exit pipeline, PE firms are under pressure to find new ways to create value. Continuation funds have emerged as a temporary solution, but they only defer the liquidity challenge. Meanwhile, macroeconomic instability and deglobalization are pushing capital towards localization, further complicating the investment landscape.

Recent industry surveys highlight that private equity is at an inflection point. There is a growing emphasis on structured, professionalized approaches to value creation, with data playing a pivotal role. PE firms are increasingly focused on identifying value opportunities early in the deal cycle and implementing transformation initiatives supported by robust data management, talent strategies, and clear financial objectives.

Why Traditional Strategies No Longer Suffice

Legacy strategies—aggressive cost-cutting, functional optimization, and geographical expansion—are losing their effectiveness. The scope for generating returns through financial arbitrage and multiple expansion has diminished. Many PE assets are now second or third generation, making it harder to find easy wins. Geopolitical instability is fragmenting supply chains, while indiscriminate cost-cutting can erode brand value and talent morale, ultimately impacting exit multiples.

To deliver operational alpha, PE firms must adapt their playbooks and operating structures. The need for innovative, adaptable strategies is more critical than ever. Industry leaders are increasing their investment in operational AI, advanced analytics, and data-driven decision-making to stay ahead.

Five key capabilities for achieving operational alpha

Generating operational alpha in this new reality requires PE firms to take a more sophisticated and scientific approach to value creation. Based on our analysis and extensive interviews with market participants, this report explores the five key capabilities that the leading PE value creators exhibit.

Outside-in intelligence

Systematically mining external signals—such as alternative data, customer behavior, and industry trends—helps firms gain asymmetric advantages and identify risks and opportunities early in the deal process. Examples include using satellite imagery for retail footfall or web scraping for pricing power.

Predictive Interventions

Advanced AI tools and stochastic modeling enable continuous monitoring, early issue identification, and proactive interventions. Predictive analytics can forecast demand, optimize pricing, and reduce customer churn, driving EBITDA uplift and working capital release.

Proprietary data assets

Centralising data across the portfolio and sharing best practices allows PE teams to uncover opportunities previously invisible to deal teams. Data-driven strategies position funds to achieve a competitive edge, streamline operations, and realize long-term value.

Operating model overhaul

Functional operating models that prioritize operational improvements over deal-centric approaches are crucial. Successful PE houses are increasing the ratio of operating partners to deal partners and investing in in-house data science capabilities.

Implementation roadmap

Integrated value creation programs—prioritised, sequenced, and rigorously executed—can separate winners from laggards. The roadmap includes diagnosing capability gaps, building data platforms, upskilling talent, industrialising playbooks, and measuring results.

Value creation in private equity

Find out how these causes and effects are manifesting across markets in KPMG’s Value creation in private equity report.

Download the full report

The Path Forward: Institutionalising Operational Alpha

Operational alpha is now the price of admission in private equity. Funds that institutionalise scenario simulation, outside-in intelligence, predictive analytics, proprietary data, and functional operating models will out-earn traditional stock pickers and attract the next wave of capital. The time to move is now. PE firms must professionalise the search and delivery of operational alpha, systematically capturing margin opportunities, embedding data-driven management, and preparing assets for exit.

KPMG stands ready to help clients navigate this transformation. With a deep understanding of the evolving PE landscape, a strong deal heritage, and a strategic view of value levers, KPMG professionals offer multidisciplinary services designed to support clients throughout the investment lifecycle. Our emphasis on performance improvement, advanced technology, and market insights helps clients adapt to changing conditions and seize growth opportunities.

If you have any queries about operational alpha, value creation strategies, or how KPMG can help your private equity firm navigate today’s market complexities, please contact our team below. We’d be delighted to hear from you and discuss how our expertise can support your goals.