Private Equity value creation in a challenging environment

In response to today’s volatile macroeconomic conditions, Private Equity firms are reevaluating the importance of levers for creating operational value. While topline growth and profitability levers were historically prioritized similarly, the survey indicates a notable shift: 66% of Private Equity firms currently emphasize profitability levers, compared to only 51% emphasizing topline growth. This shift signals a subtle yet significant pivot toward cost optimization and operational efficiency as firms adapt to tighter margins, inflationary pressures, and elevated financing costs.

However, the ability to tailor the strategic focus to the unique characteristics and performance profile of each portfolio company remains the most critical factor in value creation success. In today’s complex environment, a “one-size-fits-all” approach is increasingly inadequate. Our experience demonstrates that effective value creation is grounded in situational diagnosis and execution agility. Underperforming or distressed assets often require turnaround strategies, including liquidity stabilization, working capital optimization and rapid cost reduction. In contrast, stable and mature companies benefit from initiative programs focused on operational and commercial excellence. High-growth companies, on the other hand, require strategies that enable scaling capabilities, building a robust organization and digital transformation (see figure 2).

Ultimately, value creation levers must be selected, prioritized, and applied strategically, aligning with the company’s maturity stage, sector dynamics, and performance trajectory. Private Equity firms that apply this differentiated approach will be better positioned to drive sustainable value creation.

To meet the evolving demands of today's macroeconomic and investment environments, we have designed a comprehensive value creation offering to address the full spectrum of value creation lever categories – operational, strategic, and financing. This integrated approach allows Private Equity firms to drive measurable improvements in portfolio company performance throughout the holding period and maximize investor returns at the exit.

The Fortlane Partners value creation framework includes the following levers (see figure 3):

• Commercial excellence
• Operational excellence
• Organizational excellence
• Corporate strategy
• M&A execution
• Capital efficiency
• Deleverage

These levers are further amplified by cross-functional, enabling levers such as Process excellence, Digital & AI and ESG that can create a double impact by improving operating margins and enhancing valuation multiples through stronger business model narratives and increased appeal to institutional investors.

While Private Equity firms continue to develop long-term internal capabilities, such as operations teams and board-level placements, external advisors are playing an increasingly critical role in value creation. According to the survey, 80% of respondents consider external consultants to be (very/ extremely) important for achieving value creation objectives.

This reflects a broader recognition of the specialized capabilities that external advisors bring, especially in high-impact and time-sensitive scenarios. The survey respondents highlighted three core areas where external support is most valuable:

• Identifying and defining value creation opportunities: Bringing outside-in perspectives and benchmarking insights to uncover untapped value creation potential
• Detailing, quantifying, and prioritizing initiatives: Translating high-level opportunities and levers into actionable, measurable initiatives aligned with strategic ambition and investment theses
• Implementing and accelerating execution: Driving disciplined implementation of initiatives with expert teams, tools, and change management methodologies

By integrating these external capabilities into their operating models, Private Equity firms can achieve faster time-to-impact and reduce execution risk – ultimately delivering superior returns in an increasingly competitive and complex investment environment.