Portfolio companies can lose 15–25% of deal value due to execution failures. How should sponsors prevent it?
Speed to value is the new competitive currency. There’s no margin for drawn-out organizational change. The speed at which people adopt change now equals the speed at which value is realized.
Yet the data is sobering: 70–90% of acquisitions fail to meet their integration objectives, with cultural friction and misaligned communication at the root of most failures. Entry multiples are slipping and hold periods are stretching, successful PE firms are those who embed change management and strategic communications into the heart of their value creation playbook.
We’ve seen the difference with our clients firsthand: GPs who actively build organizational execution infrastructure outperform peers by 2–3 percentage points in IRR. This isn’t about soft skills, rather it’s about protecting capital and accelerating time-to-value.
Related insight: Momentum in the Middle: Tracking Trends in Middle-Market PE
The Hidden Value Destroyer: Organizational Execution Failures
In most portfolio companies, the biggest barrier to hitting the investment thesis isn’t the strategy, it’s the behavior inside the business. Consider these realities:
- Only 1 in 3 major change initiatives fully meet their goals
- 41% of employees resist change due to organizational mistrust
- 70–90% of M&A deals fall short of projected benefits, with cultural issues often to blame
- More than half of integration activities depend heavily on IT, yet technology change is rarely managed with the same rigor as financial and operational change
This “cost of confusion” has direct impact on IRR: misaligned teams can delay synergy realization by 4–6 months, poor communication raises people-related risk by 72%, and attrition can cost up to 200% of an employee’s salary in replacement costs.
How the Best Sponsors Get It Right
Top-quartile PE performers have learned that the ability to execute change at pace is just as valuable as the deal thesis itself. Their competitive edge comes from building organizational moats, systems that make change predictable, fast, and sustainable.
Six proven execution levers separate the winners:
- 100-Day Leadership Alignment Playbook
Weekly sponsor check-ins, shared assumptions, and unified decision-making from the top down - Middle Manager Acceleration Program
Preparing the most trusted communicators in the company to lead change, shortening integration timelines by up to six months - Real-Time Sentiment Intelligence
Identifying friction early, before it becomes resistance - Decision Velocity Framework
Clear ownership and faster choices that keep integration momentum - Trust-Based Communication Cadence
Weekly updates that increase engagement by over 20% and improve retention - Synergy Tracking Infrastructure
Measuring progress toward financial targets monthly to keep leadership accountable
Related read: The Hidden Driver of M&A and Transformation Success: Communications and Change Management
From Day 1 to Value Creation
The best sponsors don’t reactively build this infrastructure during a crisis. They implement these systems from day one. A 90-day roadmap transforms execution readiness. For example:
- Days 1–30: Leadership alignment workshops, middle manager training, baseline sentiment measurement
- Days 31–60: Launch weekly updates, clarify decision authority, form cross-functional integration teams
- Days 61–90: Activate feedback loops, deploy synergy tracking dashboards, begin exit readiness assessments
These steps typically deliver a 3–6 month payback through accelerated synergy capture and reduced integration costs.
Why Speed and Alignment Define the Winners
As the middle market adjusts to longer hold periods, tighter capital, and shifting valuations, operational alpha is no longer optional. The next level of value creation is about upgrading the systems that make the business model executable—turning complexity into coordinated action and making change an expected, not disruptive, part of the culture.
E78’s commitment to our clients is clear: we bring expertise, deliver value, and foster impactful relationships. We partner with sponsors, executives, and operating partners to ensure that change management is part of the infrastructure for IRR protection and growth.
Related research: From Leverage to Leadership: How Operating Partners Drive Value Today
Your next move: Before your next board meeting or integration checkpoint, ask, “Are we giving this organization the clarity, cadence, and leadership it needs to move at speed? Or are we hoping change will happen on its own?”
