Private equity has a religion: operational excellence through systematic value creation. The data appear unassailable. McKinsey reports that operationally-focused GPs generate IRRs two to three percentage points higher than peers. Bain finds that structured value creation delivers 3.0x returns versus a 1.9x industry average—a 58 per cent performance premium.
Here’s the heresy nobody wants to admit: the same discipline that creates outperformance is now destroying more value than it generates.
The numbers behind the orthodoxy’s failure
Simon-Kucher’s 2025 study reveals what consulting firms won’t tell clients: two-thirds of private equity (PE) value creation initiatives fail to deliver expected outcomes. One in three business improvement programs produces zero measurable return. In value-destructive deals, more than 10 per cent of employees depart immediately post-close, with the worst transactions losing 21-30 per cent of key talent.
Most damningly: 75 per cent of portfolio company CEOs are replaced within two years—not because they’re incompetent, but because they resist the new owner’s systematic playbook. When AlixPartners surveyed PE practitioners, 75 per cent reported direct experience with portfolio failures caused by CEO-investor misalignment. Yet only 13 per cent conduct cultural evaluation during diligence.
The industry identifies the problem, then systematically engineers the conditions that produce it.
What actually kills value
Simon-Kucher dissected why value creation initiatives fail:
- Poor implementation: 53 per cent
- Unrealistic business cases: 37 per cent
- Portfolio company resistance: 35 per cent
Notice what’s absent? Insufficient KPIs. Inadequate governance. Too little systematisation. The failure mode isn’t under-management—it’s over-management imposed before organisations can absorb it.
I’ve watched this pattern destroy dozens of companies across Southeast Asia. A founder-led B2B software company generating 40 per cent annual growth gets acquired by a PE firm deploying its “proven playbook.” Within six months, board decks balloon from 15 to 60 slides. Hiring approvals stretch from days to three weeks. The product roadmap freezes pending “strategic review.”
Twelve months later, revenue growth has halved, the CTO has quit, and the PE firm convenes an urgent off-site to diagnose “execution challenges.” The playbook wasn’t wrong. The timing destroyed the business.
The elite firm counter-strategy
Here’s what separates genuine 3x performers from systematisation zealots: they treat frameworks as tools to amplify momentum, not replace it. They recognise that premature systematisation in high-growth companies is value destruction wearing the costume of best practice.
Top-quartile firms do something radically different in year one. They watch. They resource. They remove obstacles. They preserve the operational momentum that justified the multiple acquisitions. Only after stability is achieved do they introduce frameworks—selectively, where they enhance rather than constrain performance.
Bain’s research inadvertently proves this. The 3.0x performers engaging in “structured value creation” aren’t imposing rigid KPI frameworks. They’re making surgical interventions: replacing one genuinely inadequate executive, funding a capital-constrained growth channel, and implementing pricing discipline where none existed. These aren’t cookie-cutter implementations—they’re strategic decisions executed with restraint.
Contrast this with 1.9x performers who arrive with 100-day plans and systematic frameworks deployed identically across portfolio companies regardless of context. Their religion is a process. Their blind spot: process imposed before momentum is established kills the growth they acquired.
“At the end of the day, it’s people and culture that decide whether a system succeeds or fails.”
The advent international lesson everyone misses
The industry loves citing Advent’s ownership of BSV, which doubled revenue growth to 20 per cent annually and expanded EBITDA margins from 20 per cent to 30 per cent. What case studies omit: Advent didn’t impose comprehensive frameworks on day one. They made two interventions—international expansion and pricing optimisation—then resourced them aggressively while leaving the operational engine intact.
This is surgical execution, not systematic transformation. The discipline came from knowing what not to systematise—preserving the sales culture and product velocity that created value in the first place.
Why this matters now
Private equity faces its harshest environment in 15 years: US$3.6 trillion in unrealised value across 29,000 unsold companies, distributions at historic lows, and acquisition multiples at 12x EBITDA. In this context, the industry’s reflexive answer has been more systematisation—more frameworks, more governance, deployed earlier and more uniformly.
The data says this orthodoxy is failing. CEO turnover approaches 75 per cent within two years. Performance gaps between top-quartile and median funds continue widening—not because median managers lack frameworks, but because they’ve mistaken process for performance.
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McKinsey’s organisational alignment research remains valid: culture explains 58.6 per cent of variance in execution outcomes. But here’s the inversion consultants won’t acknowledge: you cannot systematise culture into existence. Culture precedes systems, not vice versa.
The firms generating genuine alpha have learned what the rest refuse to accept: systematic value creation is timing-dependent, not universally applicable. Deploy frameworks too early, and you destroy growth. Deploy them when leadership is stable, baselines are established, and organisations have absorption capacity—and systems amplify performance.
The uncomfortable truth
As Bain observes, the cost of market-beating returns continues rising as fees compress. Winners won’t be those with the most sophisticated frameworks but those with judgment to know when frameworks enable versus suffocate performance.
The industry sold the world on systematic value creation. The uncomfortable truth is that the system itself has become the primary destroyer of value. The competitive advantage has become a vulnerability.
Elite firms have discovered that the hardest discipline isn’t imposing rigour—it’s having the restraint to preserve entrepreneurial velocity when every instinct says to systematise faster. That judgment, unglamorous and maddeningly contingent, is now the true source of private equity alpha.
The beatings will continue until morale improves. Or until the industry learns that its most sacred principle requires the one thing PE hates most: patience.
This article is part of David Kim’s Value Creation column. It sits alongside the Asia Value Creation Awards, which aim to recognise PE and VC teams driving long-term, fundamentals-led value creation across the region.
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