Europe’s private equity firms hasten value creation plans amid geopolitical volatility

Private equity investors are throwing funds at acquisitions more and more quickly, as they try to realise value creation in a constantly changing market, research from Alvarez & Marsal shows. Talent shortages, and geopolitical uncertainty, mean that a rapid turnaround is important to maximising returns on new purchases.

Europe’s private equity market has endured a turbulent recent period – with heightened inflation, sluggish economic performance, and uncertainty around trade tariffs with the US all contributing to some dealmakers second-guessing themselves. But according to a new study from Alvarez & Marsal, organisations are reorientating their models to make use of their dry powder, one way or another.

Steffen Kroner, managing director for private equity performance improvement at A&M, said, “Private equity value creation has entered a new phase. The firms that outperform in this cycle will be those that build stronger businesses through operational discipline, sharper commercial execution and better use of data. Higher valuations, longer hold periods and geopolitical shocks have raised the bar for every value creation plan. Sponsors need to identify the operational levers before close and start executing from day one.”

Key threats

On behalf of Alvarez & Marsal, research firm Statista Q surveyed 200 private equity professionals and portfolio company executives across ten European markets in the first quarter of 2026. Respondents were drawn from PE funds across Denmark, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the UK, as well as C-level executives of PE-backed portfolio companies in those markets.

The resulting data spelled out a clear picture of the risks private equity players across the continent perceive as their top priorities. And unsurprisingly, geopolitical volatility is king of the hill. With the US’ chaotic war with Iran currently constraining the flow of energy materials, and goods across critical trade routes in 2025, 62% of private equity leaders identified geopolitical factors as the leading challenge impacting value creation and returns now.

Connectedly, a year after US President Donald Trump’s ‘Liberation Day’ punitive tariffs for the nation’s trade partners derailed market expectations in 2025, 58% of leaders identified trade volatility as the next biggest threat – alongside persistent inflation. Meanwhile, despite its supposedly transformative potential, this has shunted the disruption of AI and new technologies into a distant fifth – cited by 31%.

Planning for uncertainty

In response to this, private equity firms are changing their plan of attack when taking on new firms. Value creation – when a private equity firm looks to add to a company’s valuation it has acquired, either via buy-and-build initiatives, or ‘optimising’ by streamlining processes and headcount – is seeing its plans become more aggressive, and sophisticated in substance. In 2025, 47% of firms noted that in the transaction cycle, they would usually hold back investing resources in value creation initiatives to later in the holding period. In 2026, that has fallen to just 7%. Meanwhile, in the reverse, the number investing within the first 100-365 days of a deal completing has boomed from 29% to 58%.

With the perception that the geopolitical picture could upend markets rapidly at any point now, the idea of wait-and-see threatens to waste opportunities for growth. At the same time, with the need to overcome key barriers in order to ‘create value’, action must be especially swift. To that end, in the last two years, 41% said capacity and talent gaps, and 37% said capability gaps (including expertise and tools) were leading issues. To realise the required acceleration on this front, nearly two-thirds of funds now use AI within value creation programmes, with adoption expanding across multiple functions. The most common applications include data analysis, operational efficiency, procurement, and finance optimisation.

Bob Rajan, Managing Director, Private Equity Performance Improvement at A&M, said: “AI is becoming an important part of the operational value creation toolkit, but it has to be tied to clear earnings and cash levers. The most effective use cases are focused on pricing, procurement, forecasting and finance automation, where better data can translate directly into margin improvement and faster decision-making.”