Non-public fairness has a faith: operational excellence by systematic worth creation. The information seem unassailable. McKinsey reviews that operationally-focused GPs generate IRRs two to a few proportion factors increased than friends. Bain finds that structured worth creation delivers 3.0x returns versus a 1.9x trade common—a 58 per cent efficiency premium.
Right here’s the heresy no person needs to confess: the identical self-discipline that creates outperformance is now destroying extra worth than it generates.
The numbers behind the orthodoxy’s failure
Simon-Kucher’s 2025 research reveals what consulting companies received’t inform purchasers: two-thirds of personal fairness (PE) worth creation initiatives fail to ship anticipated outcomes. One in three enterprise enchancment applications produces zero measurable return. In value-destructive offers, greater than 10 per cent of workers depart instantly post-close, with the worst transactions shedding 21-30 per cent of key expertise.
Most damningly: 75 per cent of portfolio firm CEOs are changed inside two years—not as a result of they’re incompetent, however as a result of they resist the brand new proprietor’s systematic playbook. When AlixPartners surveyed PE practitioners, 75 per cent reported direct expertise with portfolio failures attributable to CEO-investor misalignment. But solely 13 per cent conduct cultural analysis throughout diligence.
The trade identifies the issue, then systematically engineers the circumstances that produce it.
What truly kills worth
Simon-Kucher dissected why worth creation initiatives fail:
Poor implementation: 53 per cent
Unrealistic enterprise instances: 37 per cent
Portfolio firm resistance: 35 per cent
Discover what’s absent? Inadequate KPIs. Insufficient governance. Too little systematisation. The failure mode isn’t under-management—it’s over-management imposed earlier than organisations can take up it.
I’ve watched this sample destroy dozens of firms throughout Southeast Asia. A founder-led B2B software program firm producing 40 per cent annual progress will get acquired by a PE agency deploying its “confirmed playbook.” Inside six months, board decks balloon from 15 to 60 slides. Hiring approvals stretch from days to a few weeks. The product roadmap freezes pending “strategic evaluation.”
Twelve months later, income progress has halved, the CTO has stop, and the PE agency convenes an pressing off-site to diagnose “execution challenges.” The playbook wasn’t incorrect. The timing destroyed the enterprise.
Additionally Learn: The tradition conundrum: Why non-public fairness’s greatest CEOs nonetheless fail and the way Moneyball considering can repair it
The elite agency counter-strategy
Right here’s what separates real 3x performers from systematisation zealots: they deal with frameworks as instruments to amplify momentum, not substitute it. They recognise that untimely systematisation in high-growth firms is worth destruction sporting the costume of greatest observe.
Prime-quartile companies do one thing radically completely different in yr one. They watch. They useful resource. They take away obstacles. They protect the operational momentum that justified the a number of acquisitions. Solely after stability is achieved do they introduce frameworks—selectively, the place they improve reasonably than constrain efficiency.
Bain’s analysis inadvertently proves this. The three.0x performers partaking in “structured worth creation” aren’t imposing inflexible KPI frameworks. They’re making surgical interventions: changing one genuinely insufficient govt, funding a capital-constrained progress channel, and implementing pricing self-discipline the place none existed. These aren’t cookie-cutter implementations—they’re strategic choices executed with restraint.
Distinction this with 1.9x performers who arrive with 100-day plans and systematic frameworks deployed identically throughout portfolio firms no matter context. Their faith is a course of. Their blind spot: course of imposed earlier than momentum is established kills the expansion they acquired.
“On the finish of the day, it’s individuals and tradition that determine whether or not a system succeeds or fails.”
The appearance worldwide lesson everybody misses
The trade loves citing Introduction’s possession of BSV, which doubled income progress to twenty per cent yearly and expanded EBITDA margins from 20 per cent to 30 per cent. What case research omit: Introduction didn’t impose complete frameworks on day one. They made two interventions—worldwide growth and pricing optimisation—then resourced them aggressively whereas leaving the operational engine intact.
That is surgical execution, not systematic transformation. The self-discipline got here from realizing what to not systematise—preserving the gross sales tradition and product velocity that created worth within the first place.
Why this issues now
Non-public fairness faces its harshest setting in 15 years: US$3.6 trillion in unrealised worth throughout 29,000 unsold firms, distributions at historic lows, and acquisition multiples at 12x EBITDA. On this context, the trade’s reflexive reply has been extra systematisation—extra frameworks, extra governance, deployed earlier and extra uniformly.
The information says this orthodoxy is failing. CEO turnover approaches 75 per cent inside two years. Efficiency gaps between top-quartile and median funds proceed widening—not as a result of median managers lack frameworks, however as a result of they’ve mistaken course of for efficiency.
Additionally Learn: Why non-public credit score is turning into the most well liked different for good buyers
McKinsey’s organisational alignment analysis stays legitimate: tradition explains 58.6 per cent of variance in execution outcomes. However right here’s the inversion consultants received’t acknowledge: you can’t systematise tradition into existence. Tradition precedes programs, not vice versa.
The companies producing real alpha have realized what the remaining refuse to simply accept: systematic worth creation is timing-dependent, not universally relevant. Deploy frameworks too early, and also you destroy progress. Deploy them when management is secure, baselines are established, and organisations have absorption capability—and programs amplify efficiency.
The uncomfortable fact
As Bain observes, the price of market-beating returns continues rising as charges compress. Winners received’t be these with essentially the most refined frameworks however these with judgment to know when frameworks allow versus suffocate efficiency.
The trade bought the world on systematic worth creation. The uncomfortable fact is that the system itself has grow to be the first destroyer of worth. The aggressive benefit has grow to be a vulnerability.
Elite companies have found that the toughest self-discipline isn’t imposing rigour—it’s having the restraint to protect entrepreneurial velocity when each intuition says to systematise quicker. That judgment, unglamorous and maddeningly contingent, is now the true supply of personal fairness alpha.
The beatings will proceed till morale improves. Or till the trade learns that its most sacred precept requires the one factor PE hates most: persistence.
This text is a part of David Kim’s Worth Creation column. It sits alongside the Asia Worth Creation Awards, which goal to recognise PE and VC groups driving long-term, fundamentals-led worth creation throughout the area.
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