How fund managers create value in Private Equity
Newsletter Review | September 2025
How do fund managers generate returns for their investors?
At the core of value creation in Private Equity lies a balance of three levers:
- Revenue growth;
- Margin expansion;
- Multiple expansion.
Understanding the relative importance of these drivers is essential to grasp how value is created across various deals. Drawing on data from more than 10'000 transactions, research shows that 54% of value creation comes from revenue growth, followed by 32% from multiple expansion and 14% from margin expansion.:
The importance of multiple expansion
While revenue growth is the largest driver overall, the data also reveals that the best-performing deals make greater use of multiple expansion than the rest of the market. This suggests that, while revenue growth is the foundation of most deals, multiple expansion is often what sets the top quartile apart.
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