OperationalAlphainPrivateEquity:MovingBeyondLeveragetoLastingValue
Private equity has evolved. Where once financial engineering and leverage were the dominant tools for driving returns, in a world of higher interest rates, greater competition, and compressed multiples, operational alpha – the value created through hands-on improvements in portfolio companies – has become the new frontier. The future of PE belongs to those who can generate operational alpha, not just transact, and have the tools to enable it (including real-time data, AI, automation, and lean systems). Forward thinking firms are institutionalizing continuous improvement as a core capability. Recent research confirms the shift: ~70% of PE firms now view operational improvements as their primary value driver, with ~65% highlighting it explicitly in discussions about value creation.View Full Report