Value Creation
Value creation is the set of actions a manager takes to increase the value of an investment beyond passive ownership.
Allocator relevance: A key differentiator in PE/growth—allocators want repeatable, measurable execution, not slogans.
Expanded Definition
Value creation can include operational improvements, pricing strategy, go-to-market, talent upgrades, cost optimization, product expansion, M&A, and strategic repositioning. In strong firms, value creation is systematic: playbooks, operating partner involvement, KPIs, and governance structures.
Allocators evaluate whether value creation is real (evidence-based) and integrated into underwriting and monitoring.
How It Works in Practice
Managers develop a plan (often 100-day), execute with management teams, and track KPIs. Reporting should connect actions to outcomes, not just narrative.
Decision Authority and Governance
Governance ensures accountability: board involvement, KPI monitoring, and escalation when plans miss. Operating partner integration is a common execution mechanism.
Common Misconceptions
- Value creation is just cost cutting.
- A “platform team” means value creation is happening.
- Value creation can substitute for poor entry pricing.
Key Takeaways
- Execution quality drives outcomes.
- Evidence and repeatability matter.
- Integration into underwriting and monitoring is the signal.