Private equity firms are refining their strategies to propel value in 2025. With interest rates stabilizing at higher levels, an elevated $1.1 trillion in US dry powder and $2.1 trillion in global dry powder waiting to be deployed, and signs of an improving IPO market, PE firms are adapting to drive returns. Creative financial engineering alone no longer cuts it—today’s top-performing firms are laser-focused on operational and strategic levers that build real business value.
For PE operating partners, five key areas stand out as essential drivers of value creation: operational efficiency and margin improvement, digital transformation and AI integration, add-on acquisitions and consolidation, exit readiness, and talent optimization. Prioritizing these areas isn’t just smart—it’s essential to thrive in an increasingly competitive environment.
1. Growth, Operational Efficiency and Margin Improvement: The Profitability Triad
In 2025, with economic slowdowns tightening growth, private equity sponsors face extended holding periods—averaging 6.7 years, the longest since 2005 (McKinsey & Company). Cost management and operational excellence are critical to sustain value creation, offset delayed exits, and maximize returns.
LPs are increasingly prioritizing Multiple of Invested Capital (MOIC) alongside internal rate of return (IRR). Firms that emphasize operational efficiency early can maintain their performance trajectory during extended investment hold periods, ensuring portfolio companies are exit-ready when opportunities arise.
By embedding operational discipline and improved financial visibility, PE firms can improve margins, enhance cash flow, and unlock EBITDA growth, positioning themselves to thrive in a market where patience and performance go hand in hand.
2. Digital Transformation and AI Integration: Building Smarter, More Scalable Companies
2024 was about AI experimentation; 2025 is about AI execution—but elite firms know that AI thrives when built on a strong digital foundation. For PE firms, digital transformation goes beyond AI adoption—modernizing core systems like ERP and EPM is critical to unlocking scalable growth.
A modern ERP streamlines business processes, enhances financial and operational transparency, and creates a platform for automation and data-driven insights. For PE-backed companies, this foundation accelerates value creation by improving decision-making, driving internal efficiencies, and elevating customer engagement.
Improved demand forecasting can boost revenue by 2% to 4%, while smarter product targeting for priority customers can improve gross margins by 50 to 250 basis points. Enhanced supply planning can cut inventory levels by 5% to 20%, reducing write-offs and improving margins by an additional 25 to 50 basis points. (Boston Consulting Group)
By investing in digital transformation strategies—such as ERP upgrades, data-driven pricing models, and customer engagement tools—PE firms create smarter, more agile portfolio companies that can scale faster and outperform competitors. Firms that combine these investments with AI capabilities will gain a strategic edge in an increasingly data-driven environment.
3. Add-On Acquisitions and Consolidation: Scaling for Impact
With ample dry powder and a fragmented market, PE firms are aggressively pursuing buy-and-build strategies. Add-on acquisitions provide a fast track to scale, especially in sectors like healthcare, technology, and professional services.
In 2024, add-on acquisitions accounted for 40% of total PE buyout deal value (McKinsey & Company)—the second-highest ratio in a decade—signaling a strategic push for consolidation-driven growth.
By integrating smaller players into platform companies, firms can identify efficiencies, expand geographic reach, and drive revenue growth faster than organic efforts alone. Successful consolidators focus on strategic integration—centralizing procurement, harmonizing technology systems, and unifying go-to-market strategies to maximize value.
4. Exit Readiness and Market Timing: Maximizing Returns
Securing strong exits will require both preparation and flexibility. While PE-backed exit value increased 7.6% to $813 billion—the third-highest exit value on record—exits remain complex, with sponsor-to-sponsor deals rising 16% as firms seek liquidity in a challenging environment (McKinsey & Company).
Meanwhile, PE-backed IPOs declined 7% in value and 20% in count, reinforcing the need for firms to prepare portfolio companies for diverse exit paths. Proactive measures such as enhanced financial reporting, improved ERP systems, and clear growth narratives are essential for commanding premium valuations.
With a growing backlog of unsold assets, firms that maintain liquidity, strengthen operations, and showcase consistent value creation will be best positioned to capitalize when exit windows open.
5. Talent and Organizational Optimization: The People Multiplier
Even the strongest value creation strategy depends on one factor: people. To sustain momentum through transitions and disruption, PE firms are sharpening their talent strategies to ensure leadership continuity.
Interim leadership and executive search solutions are key to filling critical gaps—whether during turnover, post-merger integration, or major transformation initiatives. Experienced interim leaders provide stability, drive progress, and keep teams aligned with strategic goals.
Firms that treat talent strategy as a proactive tool—not just a hiring function—will gain a competitive edge. By placing leaders who can step in quickly, manage uncertainty, and rally teams around growth objectives, PE firms can protect value and accelerate performance when stability is most critical
Propel Value Creation with End-to-End Advisory Services for Private Equity Success
E78 is uniquely positioned to help PE clients execute on these five critical levers. Our comprehensive services deliver strategic guidance throughout the entire investment journey—from deal origination to value realization—helping sponsors and their portfolio companies turn these value levers into competitive advantages and achieve sustainable growth.
- Operational Efficiency: Identify cost-saving opportunities and drive tech-enabled process improvements that unlock margin growth.
- Digital Transformation: From AI deployment to data-driven growth strategies, our portfolio company clients are positioned to embed technology that creates real value.
- Add-On Acquisition Support: Our clients benefit from holistic M&A guidance and post-merger integration strategies that accelerate scale and unlock synergies.
- Exit Preparation: Strengthen financial reporting, improve ERP systems, and craft compelling growth narratives to maximize exit outcomes.
- Talent Optimization: Solutions augment and build leadership teams with PE expertise, capable of delivering transformational results.
Firms that excel in 2025 will be those that combine sharp strategy with precise execution. E78 drives growth at PE firms by improving visibility into performance and delivering knowledge-based solutions to solve the complex challenges around people, process and technology. Our clients experience stronger, more valuable portfolio companies that outperform in any market environment. Contact us to learn how E78 can help your firm turn strategy into results.
