Will value creation still matter in five years?

By Andrew Lentin, Managing Partner, Swan Partners 

Value creation is not going away. If anything, it is becoming more central to the private equity model – not because the industry needs a new label for what it already does well, but because the bar is rising on how clearly that value is identified, delivered and evidenced.

Private equity has done a great deal to professionalise value creation over the past decade. What began as a sharper focus on repeatability and operational grip has matured into a serious discipline across much of the market. Many firms now bring a level of structure and pace that is materially stronger than it was even five years ago. That is a strength, not a weakness.

The question now is not whether value creation still matters. It is whether the next generation of value creation will be more precise, more selective and more closely tied to the realities of execution and exit.

There will always be an investment thesis. There will always be a plan for how value will be built. What is changing is the level of proof required, the speed at which that plan must convert into outcomes, and the quality of information that stakeholders increasingly expect to sit behind the story.

In the earlier phase of value creation as a more formalised concept, LPs rightly wanted confidence that returns were being driven by repeatable capabilities rather than favourable market conditions alone. That demand helped drive a step change in operating models, portfolio support and execution discipline. The industry responded well. Operating teams became more sophisticated and plans became more structured, while many firms built genuinely differentiated capability.

As with any model that becomes widely adopted, some practices inevitably become standardised. But that should not obscure the more important point: private equity has been right to invest in value creation, and the firms that have done it well are now better placed for what comes next.

The next phase is unlikely to be more expansive. It is more likely to be more discerning. The strongest value creation plans will focus less on covering every part of the organisation and more on identifying the few interventions that genuinely move enterprise value. That requires confidence – not just to invest behind the right priorities, but to leave lower-impact activity alone, or to stop doing things that no longer justify time and capital.

That shift is positive. It reflects a market becoming more mature, more commercially disciplined and more evidence-led.

AI will accelerate that trend, but probably in a more practical way than much of the current commentary suggests. As with digital before it, AI is likely to become part of the operating fabric of the business rather than a standalone value creation theme in its own right. The real opportunity is not to apply AI indiscriminately, but to use it with intent: to remove friction, sharpen decision-making and reveal where effort can be redeployed or eliminated altogether.

That, in turn, raises an important question. Is the data environment strong enough to support the decisions the business needs to make?

Many private equity firms and portfolio management teams are already asking exactly that – and rightly so. Better data is no longer a “nice to have” in value creation. It is becoming foundational. But that does not mean every business needs to solve data architecture in full before action can begin. In many cases, waiting for a perfect dataset simply slows momentum.

A more useful approach is to begin with the equity story and work backwards. At exit, what are the few statements the market needs to believe? What analysis will support those claims? Which KPIs underpin that analysis? And what data points are needed to calculate them consistently and credibly?

That creates a focused dataset that can be improved quickly, used immediately and expanded over time. More importantly, it links value creation directly to exit readiness. It turns reporting, analytics and performance tracking into part of the value narrative early, rather than leaving them to be assembled under pressure at the end of the hold period.

So will value creation still matter in five years? Undoubtedly.

But the firms that stand out will not be the ones with the longest plans or the most workstreams. They will be the ones that continue to do what the best of private equity already does well: focus on the interventions that matter most, execute them at pace, and support the equity story with evidence that stands up when scrutiny is highest.