Execution Over Strategy: The Human and Data Hurdles in Private Equity Value Creation

A recent survey of 126 professionals across banking, consulting, corporate development, and private equity sponsors sheds light on the most significant execution challenges in realizing value creation plans. The findings highlight distinct priorities and pain points across these different professional groups, underscoring the multi-faceted nature of operationalizing value in today's PE landscape.

The Dominance of Talent and Change Management for PE Sponsors

For private equity sponsors, "Talent gaps and change management resistance" emerged as the most significant execution challenge, cited by a commanding 57% of respondents in this category. This finding aligns with broader industry trends that emphasize the "people" aspect of value creation. Studies consistently show that successful private equity investments are often characterized by strong management teams and a culture that embraces change and operational improvement. McKinsey, for example, highlights that human capital initiatives, including talent development and organizational design, are crucial levers for value creation in private equity, often yielding significant returns when executed effectively. The survey results suggest that securing the right leadership and ensuring their buy-in and ability to drive change within portfolio companies remains the paramount concern for those directly responsible for managing PE assets.

Data Quality: A Persistent Challenge Across the Board

While talent and change management top the list for PE sponsors, "Data quality and limitations in performance tracking" stands out as a pervasive challenge across many professional groups. Overall, 33% of all respondents identified this as the most significant hurdle. Consultants, in particular, feel the brunt of this issue, with 46% citing it as their primary concern, followed closely by bankers at 35%. This underscores the critical need for robust data infrastructure and analytical capabilities to accurately measure performance, identify opportunities, and track the impact of value creation initiatives. In an environment where data-driven decision-making is key, the inability to access clean, reliable, and timely data can severely impede a firm's ability to implement and monitor its strategies. The increasing complexity of financial markets and the rapid pace of change demand real-time insights, making high-quality data an indispensable asset for effective value creation.

Technology Integration and Alignment of Leadership

"Technology integration and legacy systems" also present a notable challenge, particularly for corporate development professionals, 33% of whom identified this as their biggest obstacle. This reflects the inherent difficulties in integrating disparate systems, modernizing outdated IT infrastructure, and leveraging new technologies to enhance efficiency and create value within acquired entities. As digital transformation continues to reshape industries, the ability to effectively integrate technology becomes a significant competitive differentiator. Meanwhile, "Aligning portfolio company leadership with PE value plans" is a consistent, though not always primary, concern across all respondent groups. Roughly one-fifth of bankers, consultants, corporate development professionals, and PE sponsors identified this as their main challenge. This suggests that while not the absolute top concern for any single group, ensuring that portfolio company management is fully onboard with and committed to the private equity firm's strategic vision remains a fundamental component of successful value creation.

In conclusion, the survey results underscore that while data and technology are critical enablers, the human element—comprising talent, effective change management, and leadership alignment—often represents the most significant execution hurdle in private equity value creation. Addressing these challenges effectively requires a holistic approach that combines strategic talent management and robust change leadership with continuous investment in data infrastructure and technological capabilities.