Private equity firms turn to operational value creation as geopolitical shocks derail deal recovery - capital-riesgo.es

Private equity firms are fundamentally shifting their value creation playbook in response to a confluence of macroeconomic and geopolitical pressures that have derailed traditional exit timelines and compressed return profiles. According to Alvarez & Marsal's fifth annual Value Creation survey released on May 19, 2026, geopolitical volatility has emerged as the single most material challenge to PE returns, with 62% of respondents identifying it as their top concern. This ranks narrowly ahead of tariff volatility and persistent inflation, both cited by 58% of survey participants. The deteriorating external environment has forced sponsors to abandon the historical playbook of top-line revenue expansion and instead focus intensively on operational margin improvement and cost discipline within portfolio companies.

The data reveal a dramatic structural shift in how EBITDA growth is now generated. Analysis of exited European PE investments shows that operational margin improvement accounted for 51% of EBITDA growth among companies that exited in 2025, compared to just 21.5% for those exited before 2023. Conversely, organic top-line expansion, which historically drove 78.5% of EBITDA gains, now contributes only 49%—a wholesale reversal in value creation mechanics. This transition reflects the reality that sponsors can no longer rely on organic growth or multiple expansion in a volatile external environment and must instead harvest value through enhanced operational efficiency and working capital optimization.

In response to prolonged exit windows and elevated entry valuations, PE firms are increasingly turning to continuation vehicles and the secondaries market to extend holding periods and manage capital return timelines. These alternative liquidity mechanisms have doubled in utilization year-over-year as traditional exit paths remain constrained. Additionally, 61% of survey respondents maintain optimism about 2026 exit prospects, yet half of all firms have actively extended value creation plans and are refinancing portfolio company debt to accommodate longer hold periods. This bifurcated outlook—cautious optimism paired with defensive positioning—underscores the sector's adaptation to a "new normal" characterized by structural uncertainty.

Technology adoption has accelerated as a countermeasure to operational challenges. Nearly two-thirds of PE firms (64%, up from 41% in the prior year) now incorporate artificial intelligence into their value creation programs, targeting enhanced operational visibility and decision-making within portfolio companies. This rapid AI adoption reflects the sector's attempt to extract operational leverage more efficiently across diversified, geographically dispersed portfolios exposed to uneven geopolitical and trade risks. Steffen Kroner, Managing Director of Private Equity Performance Improvement at A&M, characterized this moment as a decisive inflection point: "Private equity value creation has entered a new phase," signaling that sponsors must adapt or risk compressed returns in an era where traditional multiple arbitrage and leverage-driven returns are no longer reliable.