The private equity playbook we relied on for decades has changed. For a long time, success was fairly straightforward: master the transaction, find the right target, and use leverage strategically to create value. Financial engineering was the heavy lifter.
But we all know the market feels different right now. High interest rates and asset prices that won't seem to budge are squeezing returns. The math doesn't work the way it used to. In this environment, you can’t just buy well and hope for multiple expansion. To unlock the full potential of a portfolio company today, you have to actually improve the business. Operational expertise isn't just a "nice to have" anymore. It is the new driver of returns.
From Dealmaking to Business Building
We are seeing a massive pivot in how value is created. Because deal flow is competitive and expensive, firms are realizing their best bet is to double down on the assets they already own. This goes beyond financial restructuring. It means looking under the hood of day-to-day operations and fixing what is broken.
Instead of relying solely on the balance sheet, forward-thinking PE firms are investing in supply chains, modernizing digital capabilities, and rethinking how their companies acquire customers. This hands-on approach helps identify opportunities that a spreadsheet simply can’t show you. It leads to growth that lasts long after the exit.
The Era of the Operator
Improving a business requires a different toolkit than analyzing one. That is why we are seeing a surge in demand for operators—professionals who have built businesses, streamlined messy processes, and driven revenue in the real world. These aren't just consultants; they are people who know how to work alongside management teams to get things done.
Think about the impact of dropping a seasoned Chief Operating Officer into a legacy manufacturing portfolio company. By bringing in advanced analytics and automation, that COO can strip out costs and improve product quality in ways a financial analyst might miss. That doesn't just look good on a monthly report; it fundamentally changes the company’s competitive position.
How the Industry is Adapting
This shift isn't limited to the mega-funds. We are seeing it everywhere. Even smaller firms that traditionally didn't have the budget for a dedicated operating bench are finding ways to compete. Many are building lean in-house teams or partnering with specialized firms to plug the gap.
This is where a partner like Aux Insights fits in. We act as that specialized operational arm, specifically for digital marketing and growth. Whether it’s figuring out why customer retention is slipping or optimizing pricing models, we provide the specific expertise needed to move the needle without the overhead of a permanent hire.
The Data Backs It Up
If you need proof that operations are the new king, just look at the numbers. A Harvard Business Review study noted that since 2010, operational enhancements—like growing revenue and cutting costs—have accounted for nearly half of the total value creation in private equity deals. That is a stark contrast to previous decades where financial leverage did most of the work.
Navigating the Due Diligence Hurdle
Integrating this level of operational depth isn't always easy. We know that bringing operators into the due diligence process can feel like it slows down the deal. Detailed assessments often reveal complexities that a purely financial review might gloss over.
However, that rigor is what saves you from bad investments. It ensures you know exactly what you are buying and where the risks lie. At Aux Insights, we have supported enough due diligence engagements to know that speed matters. We work at the pace of the deal to provide a thorough understanding of a target’s growth levers—specifically in digital marketing—so you can make an informed decision without missing the deadline.
The Bottom Line
The private equity model is evolving. Success in this market demands more than just adept dealmaking; it requires a proactive approach to building better companies. As operational strength becomes the primary lever for value creation, the firms that embrace this shift will be the ones driving sustainable growth and maximizing their returns.