Date:
2025-10-20
Reading time:
6 minutes
Authors:
Stefano Monza (Partner BIP), Simona Maria Dossena (Head of Strategy BIP Corporate Finance & Strategy)
Value Creation for Private Equity
Effectiveness and speed as distinctive assets in a dynamic and volatile macroeconomic context.
In an increasingly competitive macroeconomic environment—marked by instability, inflation, geopolitical tensions, and rapid technological advances—the challenge for private equity funds is not so much to generate value; that has always been their mission. The real complexity today lies in how that value can be created.
Back to Basics: The Role of Leverage
Financial leverage has not disappeared from the private equity vocabulary, but it has taken on a different meaning compared to the past. In previous decades, the prevailing approach relied heavily on aggressive use of debt—investing limited equity and applying high leverage to maximize returns. Today, this model has been scaled back, both due to tighter regulations introduced by the banking system to safeguard financial stability, and to a greater awareness of the risks tied to excessive exposure.
Leverage still plays an important role, but it is now used with greater caution. Alongside traditional banks, alternative instruments such as private debt and unitranche financing are gaining ground. These offer greater operational flexibility and faster execution, thanks to less restrictive covenants. However, this flexibility comes at a cost: these forms of financing are generally more expensive than traditional bank debt, both in terms of interest rates and additional conditions.
In this context, private equity is returning to its fundamentals: the long-term sustainability of the financial structure, the ability of portfolio companies to withstand economic cycles, and the industrial strength of their business models. Debt, therefore, is no longer the sole driver of value creation, but a tool to be used carefully within a broader, well-balanced strategy.
This balance makes it possible to build solid deals capable of generating value even in volatile environments.
Human Capital as a Strategic Lever
The industrial dimension cannot be separated from the human one. Governance—especially in family-owned businesses—is often the most delicate battlefield. Here, private equity must introduce rules, processes, and transparency without disrupting the cultural balance. The relationship with the entrepreneur is crucial: it requires sensitivity, active listening, and the ability to bring in new expertise without appearing intrusive.
On an operational level, funds focus on a triad of key roles: CFO, COO, and Commercial Director—figures essential for turning strategy into concrete action. At the same time, attention to talent management is increasing: not cuts, but upskilling and reskilling.
The goal is to close organizational gaps, enhance existing capabilities, and attract new talent. This dispels the myth of private equity as “job cutters”: data show that, on the contrary, the entry of a fund often leads to job creation and a rise in the overall skill level of employees.
Human capital thus becomes the most valuable asset: without a motivated and aligned team, no industrial plan can be successfully implemented.
ESG and Sustainability
Sustainability has evolved from a “tick-the-box” exercise into a distinctive driver of value. ESG reports are now standard in every due diligence, but the real impact comes from how they are applied. When treated as mere regulatory compliance, they risk remaining marginal; when translated into concrete actions, they can generate real advantages.
New generations of consumers, in particular, are raising the bar: they avoid products with non-recyclable packaging, choose brands that respect the environment, and reward companies attentive to sustainability and inclusion. For private equity funds, ESG practices have become an essential component of the investment strategy. However, rather than serving as an immediate lever for revenue growth, sustainability today should be viewed as a long-term strategic investment—crucial for protecting a company’s value over time, strengthening its reputation, and aligning it with the expectations of markets, regulators, and stakeholders.
The return on this investment may not be immediate, but it becomes critical to ensuring the future competitiveness of portfolio companies in a context increasingly focused on environmental, social, and governance criteria.
Here too, balance is key: a dogmatic approach can create cultural resistance, especially when entering international markets with differing sensitivities. The challenge lies in implementing sustainability and inclusion intelligently, adapting them to the context without undermining their intrinsic value.