KPMG’s latest global private equity report warns that private equity firms must overhaul their operating models, as traditional private equity strategies to create value no longer suffice.
The report reveals the next decade “will favour firms that can systematically generate operational alpha, by using structured, data-driven, and professionalised approaches to differentiate themselves as traditional deal and financing advantages fade”.
KPMG’s research, based on a survey of 500 industry leaders, shows that a shift toward disciplined, data-driven value creation has already begun, but that more needs to be done.
Tilman Ost, global private equity advisory leader at KPMG, said: “I think we are at an inflection point. This is not a time where you can do financial engineering, or operate on multiple arbitrage. Those times are gone.”
He added that transforming the value creation model “isn’t simply about adding more operating partners or doing more due diligence”.
“It’s about being more predictive, more data-driven and more agile. And that requires a rethink of the entire value creation process. Quite a number of private equity firms are not there yet,” he said.
KPMG’s report, Value creation in private equity: From stock-pickers to the quant PE house, says private equity firms need to balance performance and resilience, deploy “outside-in intelligence”, embrace predictive interventions such as AI or GenAI, centralise proprietary data assets, and overhaul operating models – in response to sector-wide pressures and evolving investor expectations.
“To drive sustainable value creation, firms need to rethink organisational structures. Operating partners make up just 18% of PE [private equity] professionals, yet 64% say their teams are growing. At the largest firms, operational value creation roles represent only 10% of staff versus 56% in investment roles – a ratio that must triple for firms to capture and execute emerging value opportunities,” KPMG says in its report.
Javier Rodriguez, global head of strategy at KPMG, added: “Generating alpha in today’s investment environment is expected to make private equity firms thoughtfully re-examine and modernise their approach to value creation. A new playbook is emerging – one that emphasises discipline, innovation, and operational excellence.”
The latest digital edition of IPE’s magazine is now available
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