Private Equity Return Optimization

For PEs and their portfolio companies, optimizing Pricing & Revenue Management capabilities to drive valuations isn't just a nice-to-have anymore—it's an essential capability to stay competitive and drive Operating Profits and IRR. With buyout entry multiples shrinking due to rising interest rates and liquidity constraints, finding new ways to create value is more critical than ever. But it's not just about landing the right acquisition—it's about leveraging every opportunity to enhance profitable growth. A robust Pricing & Revenue Growth Management strategy, pre- and post-acquisition, is one of the most impactful business levers for influencing EBITDA. It allows PE teams to overcome portfolio challenges, boost performance, and meet investment goals. Effective due diligence goes beyond financial health checks. It involves a deep dive into pricing strategies, revenue streams, profit leakages, customer and product mix influence, and market positioning to assess profitability and growth potential. A Pricing and RGM-focused due diligence process provides unique insights, enabling PE teams to negotiate favorable deals and identify value-creation opportunities before closing the transaction. With the help of AI and Machine Learning, PE firms can analyze market trends, competitive threats, and pricing sustainability. This evaluation gives you a competitive edge—identifying untapped growth areas or determining whether a company's pricing model can withstand market fluctuations. The work doesn't stop at acquisition—in fact, it's only the beginning. Aligning pricing strategies with evolving business goals and market dynamics ensures your portfolio companies continue to deliver strong returns. Strong Pricing and RGM capabilities should provide ongoing pricing governance, advanced analytics, and margin optimization solutions to refine pricing strategies near real-time. Our latest article, "Pricing & Revenue Growth Management Advisory for Private Equity Firms and PortCos," explores these strategies in detail, including how to evaluate pricing acumen, uncover growth opportunities, and optimize margins. For Private Equity firms looking to in-source Pricing & Revenue Growth capabilities for their portfolio companies, we offer a roadmap to build the necessary strategy, analytics/infrastructure, and execution roadmap. In-house capabilities ensure that your pricing strategies align with investment objectives and market demands, maximizing efficiency and portfolio value. The takeaway? Pricing & Revenue Growth Management isn't just a nice-to-have strategic lever—it's a value-creating force that can make or break PE investment. Investing in these initiatives pre- and especially post-acquisition enhances profitability, drives market competitiveness, and ultimately increases the portfolio's long-term value.

PE firms don't buy revenue. They buy predictable cash printing machines. I've worked with enough PE portfolio companies to spot the pattern... Most CEOs think Private Equity success comes from "cutting costs." They're missing the actual playbook. After watching PE partners transform 47+ companies, here's what actually drives those 3x-5x returns: The Ruthless Trifecta That Separates Winners From Losers ✨ Margin Expansion (Not Cost Cutting) PE doesn't slash expenses randomly. They eliminate VARIANCE. ➠ Wasteful stop/start cycles ➠ Inconsistent delivery quality ➠ Manual processes that break under load ➠ Resource allocation chaos The magic isn't spending less. It's spending PREDICTABLY on things that compound. ✨ Cash Flow Reliability (Not Revenue Spikes) Most companies chase big months. PE companies engineer CONSISTENT months. They build systems that generate cash flow like clockwork: ➠ Recurring revenue models over project-based ➠ Automated collection systems ➠ Predictable customer acquisition costs ➠ Systematic upsell sequences Revenue volatility kills valuations. Cash flow predictability creates them. ✨ System Scalability (Not Hero Dependence) Here's where most leaders fail spectacularly... They build companies that require THEM to function. PE companies build machines that run WITHOUT the founder: ➠ Documented processes for every critical function ➠ KPI dashboards that predict problems before they happen ➠ Decision frameworks that work without executive intervention ➠ Team structures that maintain quality during rapid scaling The Hidden Brilliance Most Miss The real PE secret? Margin expansion comes from systems running LONG without stop/start cycles. Every time you restart a process, you lose: • Training investment • Momentum efficiency • Quality consistency • Predictable outcomes Elite PE firms don't optimize for quarterly performance. They optimize for CONTINUOUS performance. Why This Matters for Your Business: Most companies operate like manual transmissions. PE-backed companies operate like electric motors: - Smooth acceleration. - Minimal maintenance. - Maximum efficiency. - Predictable output. The difference isn't capital. It's systematic thinking. The 90-Day PE Transformation Framework Month 1: Eliminate Variance ➠ Document every process that creates inconsistent outcomes ➠ Identify the top 3 "hero dependencies" in your operation ➠ Build dashboards that show real-time system health Month 2: Systematize Cash Flow ➠ Convert one-time buyers into recurring revenue streams ➠ Automate collection and follow-up sequences ➠ Create predictable acquisition cost models Month 3: Scale Without Breaking ➠ Test systems under 2x current load ➠ Build decision frameworks that work without you ➠ Create quality control mechanisms that maintain standards Because in the end... Capital follows systematic cash flow generation. Always. P.S. What's the biggest "variance" in your business that's killing your margins?

The biggest risk to Private Equity is the "Private" The greatest risk in private equity today isn’t macroeconomic, it’s operational opacity. The traditional PE model was built for a different era. Value came from financial engineering, multiple arbitrage, and access to proprietary deals. But that edge is eroding. In today’s environment, outperformance is operational, and operational performance depends on information flow, collaboration, and speed of execution. To drive true value creation, we need to replace secrecy with systemization. Here’s what needs to change: 1. Build Cross-Portfolio Benchmarking as Infrastructure Every portco should be benchmarked against its peers within the fund, not just in financials, but in marketing efficiency, conversion rates, hiring velocity, cost per acquisition, and customer lifetime value. If one company has cracked paid search or inside sales hiring, that playbook should become shared IP. 2. Operational Networks, Not Just Financial Controls Private equity firms love finance controls. Weekly cash reports, 13-week forecasts, capex committees. But the same rigor rarely exists on the operational side. Create centralized communities for operators, CMOs, heads of CX, GMs, who meet regularly, share dashboards, discuss tools, vendors, campaigns. 3. Institutionalize Lessons Learned Too often, learnings die when an operator leaves or a project ends. Start documenting success (and failure) systematically. Turn execution into a knowledge system so the fund learns faster than any single company can on its own. 4. Elevate Reporting from Static to Strategic Replace monthly board packs with real-time dashboards built around leading indicators and value creation metrics. Marketing ROI. Sales cycle velocity. CAC payback. Not just results, but drivers. Tie every operating initiative to value impact and make it visible across the firm. 5. Standardize the Tech Stack Across PortCos Create a preferred tech stack for analytics, CRM, call tracking, customer support, and marketing. Standardization speeds up execution and simplifies measurement. 6. Start Acting Like a Platform, Not a Portfolio Most PE firms own a portfolio but don’t operate a platform. The difference? A platform connects. It has shared services, knowledge transfer, centralized support, and execution leverage. Treat every new company not as a blank slate, but as an opportunity to plug into something bigger. The result will be speed, insight, and scale. By making the private less private, we shorten the learning curve, eliminate redundant work, and compound wins across the portfolio. The future of PE is connected, data-driven, and collaborative. The firms that unlock it will separate from the pack. Not by doing more deals, but by doing smarter work.

I typically avoid long posts on LinkedIn. And, I definitely avoid macro-focused posts, preferring to focus on my niche area of expertise. That said, I’ve been asked repeatedly about my expectations for interest rates — and more importantly, what this environment means for private equity. Here’s the short version: 1. Rates aren’t going back to zero. The era of ultra-cheap money is over. 2. Leverage-driven returns are being replaced by operating-driven returns. 3. Liquidity will be harder to manufacture, but more valuable when it exists. 4. Private credit and structured capital will play a bigger role in the next cycle. 5. The best PE investors will look more like capital engineers than financial engineers. A bit more color behind each point: 1. Rates aren’t going back to zero. The market has moved past the idea of a quick reversion to 2% policy rates. Inflation may moderate, but fiscal deficits, demographics, and global capex demand make “higher for longer” a structural reality. That means the cost of capital is once again a real input in every deal — and that’s resetting how assets are valued, financed, and ultimately exited. 2. Leverage-driven returns are being replaced by operating-driven returns. With the average LBO requiring equity checks of 40-60%, returns can’t rely on multiple expansion or cheap debt. In general, private equity is rediscovering its roots as an operating (rather than financial) business. 3. Liquidity will be harder to manufacture, but more valuable when it exists. The best sponsors are planning liquidity events earlier, building flexibility into their capital stack, and viewing liquidity optionality as a strategic imperative rather than an assumption. 4. Private credit and structured capital will play a bigger role. The retreat of traditional banks has left a void that private credit continues to fill — but the tone is shifting from “aggressive deployment” to “selective underwriting.” Sponsors that build a diversified supply of credit providers will find creative ways to refinance, recap, or fund growth even in a tougher market. That dynamic will define the next wave of deals. 5. The best investors will be capital engineers NOT financial engineers. This environment rewards people who understand structure — not just leverage ratios, but how capital, liquidity, and ownership interact over time. Whether it’s layering NAV-based financing, executing a structured minority sale, or designing continuation options, the firms that can engineer liquiidty flexibility will win in a world where money actually costs something again. The takeaway: “Higher for longer” isn’t a headwind — it’s a filter. It’s separating investors who were playing the spread from those who can build and compound real value. We’ve been here before, just not recently. The firms that adapt fastest — embracing structure, operational rigor, and strategic liquidity — will define this next cycle of private equity. #privateequity #privatecredit