Rising interest rates have fundamentally changed the economics of value creation in private equity and corporate portfolios. The era of multiple expansion is over; the imperative now is operational performance improvement.
For much of the past decade, a significant proportion of private equity returns were generated through multiple expansion. That environment has changed materially. Returns must now come primarily from EBITDA growth and margin expansion.
Our experience across industrial, healthcare, consumer, and financial services portfolios suggests that the most significant improvement opportunities consistently reside in procurement and supply chain, workforce productivity, commercial excellence, and working capital — typically representing 8–15% EBITDA improvement opportunity.