The playbook on operational value creation is being dusted down and updated as PE firms approach building resilient businesses.
Along with the growing influence of generative AI and the rise of hyper-specialists able to execute highly refined investment strategies in specific domains, this is pushing the asset class into an era of deeper maturation.
One in which talent – specifically the ability to attract the brightest, inquisitive minds – will be not only a ubiquitous feature, but a core component, not only within a GP’s deal team, but also within its back-office and wider operating network.
As was revealed in a recent edition of The Weekly Spin, a survey by GP-Score found that LPs overwhelmingly regard operational value creation as a critical factor in manager selection. The message is clear: they want granular evidence not marketing fluff.
So, is this a time to face the music?
Certainly, private equity firms continue to grapple with longer fundraising cycles while the pressure of exiting assets to realise returns for investors shows no sign of easing off. This has manifested in GPs embracing alternative liquidity generation solutions, such as NAV loans and continuation vehicles, to cope with the exit log jam that remains. As McKinsey wrote recently, in 2024 more than 18,000 companies had been under PE stewardship for more than four years; a six-fold increase compared to 2005. GPs will be entering the second half of 2025 hoping that the IPO markets can show some signs of improvement, although this too remains largely inert.
The only notable deal this year was the NYSE listing of Venture Global in January with a $58.7 billion valuation; making it by far the largest exit in Q1 2025. AI, robotics and defence-related companies could help fill the pipeline. In the meantime, GPs are supporting management teams with ongoing M&A opportunities to secure valuation growth.
Through its Elevate strategy, Eurazeo, is also highly active in Europe’s lower mid-cap buyout segment. Over the last quarter, the team has successfully completed three buyout transactions across France, Belgium, and Germany. Competition for premium assets is intense, with valuations staying elevated, particularly in the Tech and Services sectors, according to Pierre Meignen, Partner and Head of Elevate at Eurazeo. “We’re also observing that management teams are increasingly selective, placing significant emphasis on a financial sponsor’s ability to support ambitious growth plans, especially international expansion.”
“There are over 12,000 PE-backed companies in Europe — a number that continues to rise as firms deploy record amounts of capital. At the same time, we’re seeing companies stay private for longer, with IPOs proving less attractive amid volatile public markets,” observes Nicolas Moura, Research Analyst, EMEA Private Capital, Pitchbook.
He notes that fundraising has remained resilient even as interest rates have climbed far above the zero-rate era. “These dynamics are reshaping exit timelines and deal strategies,” he says, “increasing the importance of operational value creation and strategic add-ons. In this environment, visibility into market behaviour and peer benchmarks is critical, and that’s where timely data and insight can make the difference. This topic matters now because the traditional playbook is evolving, and firms need to adapt quickly to preserve returns.”
Timely data is something that GPs are working on with investee management teams to scale up companies as they embrace digital transformation. Automating business processes, using AI tools to aggregate customer data to improve product innovation and sharpen content/marketing initiatives to expand into new markets...everything is now becoming more dependent on granular data. Private equity firms recognise this as they adapt their playbooks to remain competitive over the next decade (and beyond). It is not only their portfolio companies that need to become AI-native: PE firms must also look at how they are embracing AI internally themselves.
The AI-native PE firm of the future will likely be characterised by deep integration of AI tools, robust data strategies and a culture that embraces continuous innovation. Those that are too slow to respond to generative AI, which arguably represents a new epoch, will simply be left behind.
Recent industry reports confirm that while generative AI adoption in private equity is accelerating, most firms are still in the early stages. According to McKinsey’s State of AI report (2025), 78% of companies worldwide have integrated AI into at least one business function, up significantly from 55% in 2023. More specifically, companies with at least $500 million in annual revenue are changing more quickly than smaller organisations.
Historically, technology prowess was less of a differentiator among GPs.
That is now changing.
A report by Pictet Alternative Advisors on AI Adoption in Private Equity (2025) found over 40% of private equity firms now have an AI strategy. Moreover, nearly two-thirds of PE firms say that more than a quarter of their portfolio companies are piloting or testing AI. As of now, GPs are still early in their AI adoption journey. Over the coming years, however, it is likely to become an increasingly important part of their value creation playbook, as they build trust in deploying generative AI tools in to the most appropriate parts of their investment process.
This will depend on having access to, and proper management of, clean data, while also ensuring that data remains protected. As noted in Bain’s 2025 Global Private Equity Report, change management is another critical challenge for GPs when it comes to supporting portfolio companies in applying AI to strategic initiatives. The Bain report further notes that GPs are working closely on change management with portfolio management teams to overcome “organ rejection” among employees resistant to technologies that could threaten their jobs.
Low AI adoption risks private equity firms losing their competitive edge in numerous ways.
Hyper-specialisation is becoming a defining feature of private equity’s evolution, and for good reason. In today’s competitive environment, specialisation is key to identifying the right assets well ahead of a formal sale process. It allows sponsors to engage early, develop differentiated angles, and build conviction - critical factors in winning deals and aligning with stakeholders.
“Post-acquisition, sector expertise becomes even more valuable,” asserts Eurazeo’s Meignen.
“It enables sponsors to implement transformation plans more quickly and effectively, driving operational improvements and strategic growth. This is essential to delivering strong performance in terms of both value creation and IRR, especially in a market where holding periods are lengthening and exit conditions are more complex.”
Nevin Raj is COO and Co-founder of Grata, a strategic business unit within Datasite which brings AI-native capabilities and proprietary data from over 19 million private companies.
In his view, the current environment is shaped by two major trends:
Firstly, firms are sitting on record levels of committed capital, intensifying the push to identify, execute, and optimise investment opportunities.
“Secondly,” he says, “fundraising has become more challenging, forcing organisations to accelerate deal flow and improve efficiency, all while maintaining lean teams. But to realise the promise of generative AI, firms need the right raw materials. AI systems can only generate insights as good as the data they are built upon. In private markets, where information is fragmented and opaque, the biggest barrier to leveraging AI is often the lack of accurate, structured, and comprehensive data. Without solving this foundational layer, it’s impossible to scale. This is why the intersection of AI and data quality is the next frontier for dealmakers aiming to operationalise AI.”
This may play to the strengths of hyper-specialists within the PE industry, as evermore sophisticated funds come to market with a focus on sub-sector opportunities within biotech (i.e. gene therapy), entertainment (media rights, sports platforms), defence (drone technology, space technology). Specialised firms have demonstrated superior performance, with data showing niche funds delivered average IRRs of 38% compared to 18% for broadly diversified funds between 2011 and 2021.
As the PE industry matures, the number and range of hyper-specialist funds, with expert teams that speak the language of their target company founders, are expected to grow.
The challenge for hyper-specialists, however, will be accessing sufficient deal volume that supports their strategy and which does not lead to issues further down the line when it comes to exiting.
Private equity is entering a more discerning era. GPs who don't just update the playbook but redefine it to create an enduring model of value creation, will be best positioned to win the long game.