Key Takeaways
- • Providence Equity Partners executives Karim Tabet and Michaël Vervisch, in a McKinsey-published interview, argue that private equity is no longer about buying well but about transforming assets through a differentiated value creation thesis.
- • Tabet says Providence's firm invests roughly half in Europe and half in the United States, and reports that some investors are rebalancing regional exposure because the US is "much less predictable than it used to be."
- • Tabet notes that PE IPOs are rare and difficult in Europe, but that Providence's middle-market focus makes large-cap secondary sales equally deep in both regions.
- • Tabet predicts a "supermarket" and "artisan" split in PE: a handful of scaled mega-managers alongside niche specialists that he expects to deliver higher returns.
- • Vervisch says the industry can no longer rely on leverage and multiple expansion alone, and that AI has accelerated the pace of portfolio company transformation over the past 12 to 24 months.
Summary
A McKinsey-published interview featuring Karim Tabet, senior managing director and head of Europe at Providence Equity Partners, and Michaël Vervisch, managing director, examines how the private equity industry is adapting to AI, geopolitical uncertainty and operational complexity. The discussion was led by McKinsey Senior Partner Kim Baroudy and Partner Sunil Kishore, and references McKinsey's 2026 Global Private Markets Report, which describes the global PE industry as having entered a mature and technically demanding phase. Tabet, who said he has worked in the industry for more than 25 years, argued that competitive advantage now depends on specialization, which he described as a tool for spotting trends early and building a differentiated investment thesis.
On regional allocation, Tabet said Providence deploys about half its capital in Europe and half in the United States. He observed a shift in some investors' preferences: while the US has delivered higher long-term growth, some investors have concluded they are overexposed to the region and are seeking a more balanced portfolio. He identified exit routes as a key structural difference, noting that IPOs are an accepted exit in the US but PE IPOs are rare and difficult in Europe. Because Providence operates in the middle market, it does not generally rely on IPOs and sees sales to large-cap buyers as equally deep in both regions. Tabet also cited the fragmentation of European markets as an opportunity to build "European champions" from national leaders, principally through M&A.
Vervisch said Providence's value creation playbook across its dozens of sector-focused companies in North America and Europe has not fundamentally changed, though the pace of transformation has accelerated due to AI. He emphasized talent, technology access and data capability as priorities, and stated that the industry "can no longer rely on leverage and multiple expansion alone." Tabet said AI is changing software development and customer service across the portfolio, citing voice agents and chatbots in customer-facing businesses such as telecommunications operators.
On industry structure, Tabet acknowledged consolidation among the largest managers, citing the complexity of fundraising and the benefits of scale for product breadth and operational resources. He argued, however, that specialization will remain important and drew a parallel to banking, forecasting "supermarkets" with scale alongside niche "artisans" that will hopefully deliver higher returns. Vervisch identified talent succession as a central concern, noting that a long-tenured CEO is no longer a reliable predictor of future success, and cited greater unpredictability in currencies, commodities and political risk.
Vervisch also described Providence's collaboration with McKinsey, including QuantumBlack, AI by McKinsey, which he said accelerated the firm's product road map by at least three to six months. He added that embedded McKinsey teams helped bring structure to a founder-led business. The interviewees' comments are their own and do not represent McKinsey's positions, according to the publication.
On regional allocation, Tabet said Providence deploys about half its capital in Europe and half in the United States. He observed a shift in some investors' preferences: while the US has delivered higher long-term growth, some investors have concluded they are overexposed to the region and are seeking a more balanced portfolio. He identified exit routes as a key structural difference, noting that IPOs are an accepted exit in the US but PE IPOs are rare and difficult in Europe. Because Providence operates in the middle market, it does not generally rely on IPOs and sees sales to large-cap buyers as equally deep in both regions. Tabet also cited the fragmentation of European markets as an opportunity to build "European champions" from national leaders, principally through M&A.
Vervisch said Providence's value creation playbook across its dozens of sector-focused companies in North America and Europe has not fundamentally changed, though the pace of transformation has accelerated due to AI. He emphasized talent, technology access and data capability as priorities, and stated that the industry "can no longer rely on leverage and multiple expansion alone." Tabet said AI is changing software development and customer service across the portfolio, citing voice agents and chatbots in customer-facing businesses such as telecommunications operators.
On industry structure, Tabet acknowledged consolidation among the largest managers, citing the complexity of fundraising and the benefits of scale for product breadth and operational resources. He argued, however, that specialization will remain important and drew a parallel to banking, forecasting "supermarkets" with scale alongside niche "artisans" that will hopefully deliver higher returns. Vervisch identified talent succession as a central concern, noting that a long-tenured CEO is no longer a reliable predictor of future success, and cited greater unpredictability in currencies, commodities and political risk.
Vervisch also described Providence's collaboration with McKinsey, including QuantumBlack, AI by McKinsey, which he said accelerated the firm's product road map by at least three to six months. He added that embedded McKinsey teams helped bring structure to a founder-led business. The interviewees' comments are their own and do not represent McKinsey's positions, according to the publication.
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