How Digital Transformation Is Driving Private Equity Value Creation in 2025
The private equity value creation playbook is fast evolving—and innovation is emerging as the ultimate advantage.
Top-performing firms that once leaned on traditional strategies, from cost-cutting to financial leverage, are now optimizing and maturing digital transformation initiatives for rapid portfolio growth. In fact, Harvard Business School study found newly acquired portfolio companies see a 14% average increase in their IT budgets.
It’s clear private equity firms recognize the power of technologies like artificial intelligence and advanced enterprise resource planning (ERP) systems. But how exactly do industry leaders create a well-developed IT strategy for maximum value creation?
This article covers:
- The Digital Transformation Imperative
- 3 Ways to Leverage Technology for Private Equity Value Creation
- Navigating Digital Transformation Challenges
The Digital Transformation Imperative
Strengthening digital and AI capabilities consistently drives financial outperformance. According to Deloitte, companies with high digital maturity achieve 28% greater net profit margins than low-maturity organizations.
Strategic IT investments create an unequivocal advantage—and this performance differential is accelerating as technology adoption curves steepen. Private equity leaders are evaluating the advanced transformation potential of portfolio companies long before acquisitions are finalized. This foresight helps to identify undervalued assets that can yield outsized returns.
3 Ways to Leverage Technology for Private Equity Value Creation
Pinpointing the right digital transformation priorities is crucial to successful private equity value creation. When evaluating portfolio companies, first identify key areas of improvement in regard to the organization’s IT infrastructure and processes. Clear objectives fuel strategic investments.
Here are examples of how private equity firms can achieve three target outcomes with focused transformation initiatives.
1. Operational Efficiency
Companies reliant on legacy applications or fragmented digital processes can transform their private equity investments by streamlining infrastructure. For example, unified cloud-based platforms can empower teams by:
- Consolidating disparate systems through integrations
- Automating manual workflows to eliminate inefficiencies
- Offering scalability for more agile, cost-effective operations
This approach to digital transformation prioritizes operational speed and flexibility to achieve cost reductions that would otherwise be overlooked. As a result, portfolio companies achieve a foundation for continued innovation and sustainable growth.
2. Talent Management
Sophisticated private equity investors are also leveraging advanced analytics and AI to unlock real-time, intelligent insights for optimal decision-making. These technologies transform how resources—from inventory and manufacturing capacity to human capital and financial budgets—are allocated and utilized.
For instance, the implementation of Workday Adaptive Planning consolidates data for visibility across portfolio companies. This empowers private equity leaders to:
- Strengthen financial strategies: Seize more opportunities with intelligent budgeting, scenario planning, and forecasting capabilities powered by AI.
- Improve workforce planning: Optimize hiring, retention, and spend with better data visibility and modeling capabilities that calculate the potential cost impact of workforce changes.
- Elevate operational agility: Understand the bottom-line impact of current supply and demand trends, sales resource allocation, and project requirements for better planning.
Data-driven resource optimization eliminates waste, helping portfolio companies meet customer needs while maximizing profitability. The ability to rapidly adjust resource allocation based on emerging trends provides a significant competitive advantage for private equity value creation.
3. Customer Engagement Capabilities
For top-line growth, private equity firms are leveraging technologies that power personalization and consistency across touchpoints. Portfolio companies can deliver differentiated CX by implementing software like:
- AI personalization engines
- Omnichannel engagement platforms
- Customer relationship management (CRM) systems with advanced workflow automation, personalization, integrations, and lead management capabilities
Through customer-centric transformations, private equity leaders can strengthen customer acquisition and retention—generating immediate and long-term revenue benefits.
Navigating Digital Transformation Challenges
Digital transformation presents tremendous opportunities, but private equity firms must navigate three critical implementation challenges to realize its full value creation potential:
- Change Management: Private equity leaders must rethink operational workflows to tackle inefficiencies in how they use technology solutions. That’s the only way you can maximize digital transformations. Additionally, portfolio companies cannot overlook the cultural changes and employee engagement initiatives required for organization-wide buy-in.
- Data Governance Complexities: Advanced technology is only as powerful as the data it receives. Issues with data quality can hinder your return on IT investment. Additionally, issues in the data migration process itself can lead to significant business disruption.
- Cybersecurity Vulnerabilities: As digital footprints expand, so do security risks. With the average data breach now costing $4.88 million, private equity firms must implement robust security frameworks that protect portfolio value while enabling transformation.
According to McKinsey, digital and AI transformation initiatives are most successful when private equity firms prepare their organizations with six factors: strategic roadmaps, qualified talent, successful operating models, modular tech stacks, strong data architecture, and proper change management. The support of an experienced technology consulting firm can help.
At TEKLEIGH, we can meet your portfolio companies wherever they’re at in their modernization journey. We provide end-to-end solutions including:
- Cloud strategy development
- Vendor evaluation and selection
- ERP implementation and optimization
- Data management services
- Cybersecurity and privacy solutions
- Project Management Office (PMO) framework development
Our private equity advisory solutions—including guidance for mergers, acquisitions, and divestitures—can further support seamless technology transitions and value creation.