PE Success Driven by Ops, Not Leverage
A new report from Bain & Company and StepStone Group finds that value creation is the primary driver of success for private equity-backed companies. This reinforces the demand for consultants focused on process improvement, operational transformation, and digital enablement over pure financial engineering.
This shift away from financial leverage is a long-term trend; operational improvements have accounted for 47% of private equity value creation since 2010, a significant increase from 18% in the 1980s. In the same period, value creation from financial engineering has dropped from 51% to 25%. This change is driven by high asset valuations and increased competition for deals, forcing firms to generate returns through genuine business performance improvement. The demand for operational expertise has led to a surge in hiring for operating partners and specialized consultants within the private equity ecosystem. These roles focus on implementing strategic initiatives, driving efficiency, and managing risks to boost the value of portfolio companies. This has created opportunities for professionals with backgrounds in management consulting and operational roles to transition into private equity operations. Mid-market and specialized consulting firms are actively recruiting for roles in their private equity and performance improvement practices. Firms like Alvarez & Marsal, AlixPartners, FTI Consulting, Riveron, and Teneo have numerous openings for consultants and managers in their operations and enterprise improvement groups. These firms are specifically seeking individuals who can drive cost reductions, revenue growth, and profitability improvements in high-stakes situations. Boutique consulting firms offer a distinct experience compared to their larger counterparts. At a smaller firm, consultants often gain deeper expertise in a specific industry or function and may have more direct contact with senior partners. The work-life balance can be better, and there are often more opportunities to contribute to the firm's culture and internal projects. In contrast, large consulting firms typically offer a broader exposure to different industries and types of projects, along with more structured training programs. While the lifestyle can be more demanding with more travel, the brand recognition of a large firm can open more doors. Daily work in a boutique setting might involve working on two projects simultaneously, while larger firms may have you focused on a single, larger-scale engagement. The key skills in demand for these roles include strategic planning, process optimization, business systems thinking, and specific operational improvement methodologies. Experience in turnaround management, supply chain optimization, and digital transformation is highly valued. Consultants in this space are expected to not only devise strategy but also to be hands-on in executing these plans within portfolio companies to drive measurable results. The day-to-day responsibilities of an operations consultant in a private equity setting involve a mix of analysis, project management, and client-facing work. This can include conducting due diligence on potential acquisitions, developing value creation plans post-acquisition, and working directly with the management teams of portfolio companies to implement changes. The ultimate goal is to prepare the portfolio company for a successful exit, either through a sale or an IPO.
