The market feels tough right now. I can see businesses are struggling, letting people go and attempting to diversify. Many people I know have struggled to find work because the 'projects' and investments aren't what they used to be. Much of this can be found in what is happening in the Private Equity market. They're struggling too. But it is not because they're not skilled; it is because the market dynamics have changed.
Private equity is not broken. It has, however, become much less forgiving. The conditions that once gave a well-bought asset several routes to an acceptable return have weakened at the same time as purchase prices, financing costs, holding periods and technological uncertainty have increased. That does not mean the asset class has lost its purpose. It means that the quality of operational value creation now matters more, and that the difference between having a value creation plan and being able to execute one has become commercially decisive.
This is why Arqvera was built. We help private equity firms and their portfolio companies (and independent midmarket companies) turn an investment thesis into a governable, measurable and executable system of change. Our role is not to produce another elegant plan that sits on a shelf, sell a technology platform or take over from management. It is to strengthen the chain of decisions, capabilities, governance, delivery and adoption through which value is actually realised. The most important work often begins in the first 10 to 20 per cent of an initiative, when assumptions can still be challenged, and choices can still be changed without an expensive programme of recovery. It then continues through the hold, keeping action connected to the thesis and building the evidence a future buyer will expect to see.
Bain captures the new arithmetic with the phrase “12 is the new 5”. Its 2026 analysis shows that an illustrative deal which might have achieved a target 2.5x return over five years with 5 per cent EBITDA growth a decade ago would now require 12 per cent. The precise requirement will differ by deal, of course, but the direction is unambiguous: entry price and financing conditions have raised the operational bar substantially. Bain concludes that maintaining past performance requires a stronger focus on value creation and the specialised capabilities needed to execute it rapidly.
McKinsey reaches the same destination from a different direction. Its analysis of 13,830 buyout deals completed between 2010 and 2022 found that leverage and multiple expansion accounted for 59 per cent of returns, while revenue growth and EBITDA margin expansion, net of dividends and debt paydown, accounted for the remaining 41 per cent. The traditional drivers have not disappeared, but McKinsey describes them as “largely spent” relative to the previous era. Higher entry multiples and a lower contribution from debt put far more pressure on management teams and operating partners to create revenue growth, margin improvement and resilient operating performance inside the business.
That distinction is important. It would be easy, and wrong, to turn the evidence into a simplistic story that private equity is failing. In 2025, buyout funds underperformed US and global public equities for a third consecutive year, returning approximately 7 per cent against 18 per cent for the S&P 500 and 22 per cent for MSCI World. Yet over the ten years to 2025, top-quartile buyout funds produced a 24 per cent IRR, ahead of both comparators, and around 70 per cent of surveyed LPs planned to maintain or increase their PE allocations in 2026. The honest story is dispersion. The asset class still works, but superior results increasingly depend on deliberate choices, differentiated capability and sustained execution rather than broad market exposure alone.
McKinsey’s comparison of specialists and generalists reinforces the point. Across 2010 to 2022 vintages, specialist buyout funds generated pooled IRRs of 17 per cent versus 13 per cent for generalists, with lower loss ratios. Their performance appears to have relied much less on multiple expansion and much more on EBITDA margin expansion. This does not prove that every specialist will outperform every generalist; however, it does suggest that repeatable operational knowledge and a clear way of creating value are becoming stronger sources of resilience. In a mature market, “we know the sector” is useful; “we can repeatedly turn that knowledge into better decisions and better execution” is much more valuable.
The exit backlog makes the execution challenge more acute. More than 16,000 companies were held for longer than four years at the end of 2025, equivalent to 52 per cent of global buyout-backed inventory and the highest share on record. The average holding period is now more than six and a half years, while five-year rolling DPI as a share of AUM has fallen to its lowest recorded level. Longer holds may provide more time to create value, but time by itself creates nothing. If the original plan loses momentum, a longer hold can simply compound management fatigue, defer distributions and increase the effect of time decay on returns.
The uncomfortable evidence is that value creation often remains back-loaded. McKinsey found that, for deals exited since 2019, 6 per cent of the total ending EBITDA margin was generated in the final year and 4 per cent in the penultimate year, compared with roughly 1 per cent in each earlier year. The report carefully describes this as a tendency, not a universal rule, but the implication is important. Value creation that begins in earnest as the sale process approaches has less time to compound, less time to become embedded and less time to produce a credible operating history for the next owner. What looks like acceleration may actually be expensive cramming.
The better model is starting early and moving to continuous value creation across the ownership cycle: establish momentum early, test the plan against reality, recalibrate deliberately in the middle of the hold, and build exit readiness well before the information memorandum is drafted. That requires more than a dashboard. It requires named benefit owners, decision rights, leading indicators, management capacity, delivery discipline and a cadence that exposes weak assumptions while there is still time to act. For portfolio companies, this is equally important. Teams need a way to translate an ambitious sponsor plan into priorities they can own without turning the business into a permanent collection of programmes.
Value creation plans tend to assume that the portfolio company can absorb and deliver the change being asked of it. That assumption deserves much more scrutiny. McKinsey reports that 60 to 70 per cent of PE-backed companies experience a CEO change during ownership and that more than 60 per cent of the replacements are first-time CEOs. It also calls the appointment of an A-plus chief transformation officer an often overlooked but critical decision. These findings point to a practical constraint: the person accountable for delivering the thesis is frequently new to the role, while the leadership team around them may already be handling integration, growth, technology change, cost pressure and the ordinary demands of running the company.
This is where apparently sensible plans begin to leak value. The strategy may be coherent, but accountability is ambiguous. The supplier reports green, but business readiness is red. A transformation programme delivers outputs while the expected commercial behaviour does not change. A buy-and-build platform acquires companies faster than it can integrate their data, processes and decision-making. None of these problems is solved by asking the same stretched leadership team for a more detailed status report. The missing ingredient is often independent executive capacity that can connect sponsor intent with operational reality, challenge the evidence and help management make the next decision.
AI makes this execution gap more consequential because it can change the assumptions underneath the value creation plan, not just add another workstream to it. McKinsey reported that almost nine in ten companies had deployed AI in at least one business function by the end of 2025, while 94 per cent said they were not yet seeing significant value. Its central warning was that productivity improvement alone is unlikely to create a sustainable advantage because competition tends to pass much of the gain to customers. More durable value is likely to come from reshaping offerings, business models and market structures. Unfettered AI usage can also create significant privacy implications, IP loss, trust erosion, decision contamination, shadow AI, capability atrophy and legal and regulatory exposure.
For PE, that creates a two-sided question. How can AI improve pricing, sales, service, software delivery, decision-making and cost to serve within the hold? More importantly, how might it alter labour economics, barriers to entry, customer expectations, channel power or the defensibility of the product before exit? Within McKinsey’s analysed sample of 471 PE-backed companies, businesses that broadly embraced AI traded at a median revenue multiple approximately 130 per cent higher than companies using it opportunistically. That is correlation, not proof that AI caused the valuation difference, and the sample should not be generalised to the whole market. Even so, it supports a more strategic question: is AI merely making today’s work cheaper via digital labour arbitrage, or is it strengthening the future business a buyer will want to own?
Arqvera’s proposition starts with a simple belief: projects do not suddenly go wrong in delivery; many begin with unresolved ambiguity, weak assumptions, unsuitable partners, missing capability or value that was never properly defined. We work across the deal and transformation lifecycle, but we place disproportionate attention on the moments before commitment. We provide an independent governance, assurance and delivery leadership layer. We do not sell software, implementation capacity or a preferred platform, and we do not place junior teams behind senior promises. That independence makes it easier to say what the sponsor, management team and supplier need to hear before optimism becomes sunk cost.
Before a deal or major programme, we help test whether the operational thesis can survive contact with reality. Trust Arq can define or examine the business case, requirements, partner fit, governance, mobilisation and delivery assumptions that shape the eventual outcome. Value Compass connects strategic drivers to measurable benefits, KPIs, baselines, owners and evidence, so that the value creation plan becomes a decision system rather than a list of initiatives. Capability Mirror designs and tests whether the organisation has the roles, skills, behaviours, decision rights and leadership capacity required to deliver what has been underwritten. Together, these lenses help deal teams see integration complexity, technology exposure, management constraints and delivery risk before those issues are embedded in price, timeline or supplier commitments.
During the first 100 days and through the hold, we turn that clarity into operating rhythm. Arqvera establishes governance that connects the board, operating partner, management team and delivery partners without adding bureaucracy. We make decision rights explicit, create evidence-based reporting, track dependencies and benefits, and identify where delivery confidence is based on facts and where it is based on hope. If a programme is already drifting, our delivery assurance and project health work provides an independent view of scope, commercial exposure, readiness, ownership and the actions needed to recover momentum. This is designed to give sponsors a leading indicator of value risk, rather than another polished explanation of what happened last month.
We also help close the leadership-capacity gap without pretending that a framework can run a business. We have designed some great frameworks! However, it's the practitioner who brings it to life. Arqvera’s fractional leaders work across delivery, transformation, technology assurance, AI value realisation and operating-model execution. This is not staff augmentation. It is senior leadership embedded at the point where judgement, structure and accountability are missing, backed by shared Arqvera methods and the wider founding team. A Fractional Delivery Director can stabilise governance and execution; a Fractional Transformation Director can connect delivery with adoption and benefits; a Fractional CIO can provide independent challenge on platforms, suppliers and architecture; a Fractional CAIO can govern AI direction and value; and a Fractional COO can strengthen cadence and cross-functional execution as a company scales or integrates.
For AI, we address both sides of the investment question. The AI.ccelerate Business Model Stress Test examines how a value creation plan holds, bends or breaks under different AI scenarios, focusing on assumptions about labour, pricing, customer value, competition and operating leverage. It produces a resilience view, classified actions and no-regret moves rather than a speculative technology roadmap. Where action is justified, the broader AI.ccelerate approach links use cases to value hypotheses, data readiness, governance, guardrails, operating-model change and human adoption, with evidence gates from idea to production. The aim is not to create more pilots. It is to give PE firms and portfolio leaders a controlled way to decide where AI could protect or create value, where it cannot, and what evidence should unlock further investment.
Underpinning all of this is a value architecture system called Arqadia, Arqvera’s AI-enabled strategy and transformation platform. Arcadia captures proven methods, diagnostic logic, evidence structures and lessons from engagements in a governed knowledge system, then orchestrates them so senior practitioners can move faster and more consistently without outsourcing judgement to a model. Every engagement strengthens the next by turning experience into evidence, patterns, improved methods and reusable intelligence, creating a knowledge flywheel rather than another folder of static templates. For PE firms, that means a more repeatable standard across portfolio companies without forcing every business through the same playbook; for management teams, it means quicker access to senior-grade analysis, clear provenance and a named human who remains accountable for the decision.
None of this creates value unless people change how the company operates. Change Studio therefore treats readiness, stakeholder involvement, communication, enablement and behaviour change as part of the design, not as a communications plan added shortly before go-live. Arqvera demonstrated this approach with Palatine PE-backed Cura Terrae, where a transformation readiness sprint reframed an apparent HR technology selection as a wider people, integration and operating-model question. The work aligned leaders, surfaced dependencies and produced a pragmatic roadmap before unresolved questions became programme risk. That is the practical meaning of setting a portfolio company up for success: better documentation may help, but better decisions, shared ownership, and a deliverable sequence are what protect value.
At exit, the same architecture provides something that late acceleration cannot easily manufacture: an evidence trail. Benefits have baselines and owners. Governance has a history. Operating improvements can be distinguished from temporary interventions. Management capability and decision-making are visible. AI initiatives can be explained in terms of commercial outcomes rather than demonstrations. This strengthens the credibility of the value creation narrative because the next buyer can see not only what changed, but how the business is equipped to sustain and extend it.
The central private equity question is no longer whether operational value creation matters. The market has already answered that. The more useful question is whether each firm and portfolio company has the execution architecture to make value creation early, continuous and provable. A value creation plan is not that architecture. Neither is a collection of workstreams, a monthly board pack or a promise that AI will make everybody more productive.
Arqvera creates value by connecting the elements that too often remain separate: investment assumptions, measurable outcomes, management capability, governance, delivery, technology choices, adoption and exit evidence. We help PE firms challenge the thesis and see across the portfolio; we help management teams turn ambition into a sequence they can deliver; and we provide senior, independent capacity where the organisation needs more than advice. The tailwinds have materially weakened. Returns must increasingly be made, and making them starts with setting the business up for success.
Is an AI and technology transformation consultancy and advisory.
We help organisations shape business cases, projects, deliver excellence, and realise change and outcomes that stick. We support organisations before, during, and after projects with an end-to-end service where our domain specialisation comes to life.
Before (Inception): We work with you to clearly define the idea, vision, strategy, and business case for change, as well as help select the right partners and establish governance
During (Execution): We help deliver the project and change objectives while keeping implementation under control through structured governance and assurance to realise intended outcomes.
After (Value Realisation): We ensure outcomes deliver measurable value and embed continuous improvement from successes and learnings.
Arqvera is led by industry veterans in the UK and USA with 100+ years of technology delivery intelligence across global consulting, digital transformation, and mission-critical projects and programmes.