PE 101: concepts that matter
Value creation in buyouts comes from three levers, and higher rates have moved the weight decisively toward operational earnings growth.
In buyouts, value creation comes from three levers:
- EBITDA growth
- Multiple change
- Amortization
But with higher rates and compressed exit multiples, the playbook has shifted decisively toward operational earnings growth and margin expansion. Current industry reviews show sponsors leaning into pricing, mix, and cost programs to offset weaker multiple tailwinds, while the liquidity logjam (exits and fundraising) raises the bar for truly underwritten, cash-generative plans.
Informational content only. Not investment advice.