Generative AI

Generative AI (GenAI) is demonstrating significant potential for private equity businesses, with 80% of CEOs observing increased efficiency among employees attributable to GenAI. Most private equity CEOs credit GenAI with boosting revenue and profitability, and they expect further profit increases in the coming year. However, trust remains essential for maximizing GenAI's potential. Less than one-third of PE executives express a high level of trust in this technology, underscoring the urgent need for Responsible AI.

From a private equity perspective, the adoption of GenAI is not just about operational efficiency but also about enhancing the value creation levers within portfolio companies. According to the Private Equity Trend Report 2025, digital transformation, including AI, is crucial for exit outcomes and generating returns. Nearly three-quarters (71%) of PE firms invested in digitally transforming their own firm or portfolio company business models in 2024, with AI being the main focus for 67% of those that invested. This indicates a strong belief in the transformative power of AI to drive both top-line growth and operational efficiencies.

Responsible Investments

More than half of private equity executives indicate that their personal incentive compensation is tied to sustainability metrics, reflecting the global trend. Most PE CEOs stated that climate investments have either not increased costs or have led to cost reductions or revenue increases, showing that sustainability is a bottom-line boost rather than a budget buster.

The Private Equity Trend Report 2025 highlights that nearly all respondents view environmental, social, and governance (ESG) levers as a core part of their value creation story when assessing buy-side opportunities. This is not just a compliance exercise but a strategic imperative. The report notes that 72% of respondents believe that the return on investment to improve ESG credentials and practice in portfolio companies exceeds the cost. This underscores the financial viability and strategic importance of responsible investments in driving long-term value.

Business Model Reinvention Nearly 40% of private equity CEOs believe their businesses may not survive another decade if they maintain their current path and emphasize the need to reinvent businesses to keep pace with evolving industry and customer demands. However, they noted that over the past five years, only 10% of revenue has been generated from distinct new business ventures.

The need for business model reinvention is echoed in the Private Equity Trend Report 2025, which states that market consolidation and buy-and-build strategies are taking center stage as firms seek out synergies and the chance to create market-leading businesses. With 64% of respondents mentioning market consolidation and 62% highlighting buy-and-build as key strategies, it is clear that PE firms are actively looking to transform their portfolio companies to stay competitive. Additionally, the report indicates that digitalisation and operational improvements are critical for driving value creation, with 61% and 50% of respondents, respectively, citing these as important strategies.