Private equity has fundamentally changed the ownership model for many organizations. Increasingly, businesses are bypassing more traditional public ownership routes as founders look to release equity, accelerate growth, or realise bigger ambitions. Private equity and venture capital firms want to accelerate that growth — but they also expect significant returns within relatively short investment windows.
At its core, private equity is simple. Invest. Grow the asset. Exit the asset. Deliver a return that outperforms other forms of investment.
For years, value creation was largely assessed through financial performance, revenue multiples, profitability, market position and leadership capability. Those things still matter enormously. But over the last five years something has changed materially. Technology capability is now inseparable from enterprise value creation in PE-backed businesses.
This is no longer just about technology companies or software-as-a-service (SaaS) platforms. Technology, digital capability and data now underpin almost every organization, regardless of sector. AI has only accelerated that reality.
Brad Scott, Investor at Maven Capital Partners, describes the shift clearly: “Technology has moved from being something we diligence as a supporting function to something that often sits right at the centre of the investment case.”
That matters because private equity is ultimately about value creation under time pressure. Most assets are held for three to five years. Every decision matters. Every delay matters. Every additional investment in people, process, technology and data matters.
Technology is no longer the plumbing underneath the business. In many cases, it is now directly shaping valuation, resilience, scalability and exit attractiveness.
Technology is now part of the investment thesis
One of the biggest mistakes organizations still make is treating technology as a secondary operational concern rather than part of the core business model.
I have always looked at technology decisions through three lenses: does it grow revenue, does it drive margin and does it improve resilience? Those three outcomes are also the core drivers of enterprise value creation.
Historically, many PE firms focused technology due diligence on risk reduction. Was the platform stable? Was it secure? Could it scale? Those questions still matter, but the conversation has become significantly more commercial.
Scott explains that investors are now asking whether “the product, data and AI capability can genuinely change the economics of the business.”
That changes the nature of due diligence entirely.
This aligns closely with EY’s view of the modern PE technology lifecycle, where value creation increasingly spans technology due diligence, transformation during the holding period and exit optimization.
Technology due diligence is no longer just about identifying weaknesses. It is increasingly about understanding whether the technology capability of the organization can accelerate growth, create operational leverage, improve retention, support expansion and strengthen the eventual exit story.
Most value is not created during the deal itself. It is created through execution discipline across the holding period — where technology, data, AI and operational delivery either accelerate momentum or quietly erode it.
Giles Moore, development manager at PXN Group, argues that “technology is no longer only supporting growth, it is directly influencing profit margins, efficiency, resilience and exit attractiveness.”
That is a major shift.
In many organizations today, the quality of architecture, operational data, delivery capability, cyber maturity and engineering leadership directly affects how scalable and investable the business appears.
Poor operational technology discipline now creates drag on value creation. Technical debt slows delivery. Weak governance creates risk. Poor data quality undermines AI capability. Fragile infrastructure reduces resilience. Slow decision-making damages momentum.
Private equity firms increasingly understand this.
Research from Boston Consulting Group reinforces this shift. BCG found that 86% of PE investors now integrate digital capability into value creation plans or investment theses, reflecting how central technology has become to enterprise growth and exit strategy.
The challenge is that many leadership teams still do not.
AI is changing the economics of operational delivery
AI now sits in almost every investor conversation, but the reality is more nuanced than the market hype suggests.
Now, AI is primarily a margin driver unless AI itself is the product.
The clearest value today comes from operational efficiency, automation and productivity improvement. Developer acceleration, workflow automation, support optimization, compliance processing, document analysis and operational throughput are all areas where AI is already delivering measurable value.
Damindu Jayaweera, Head of Technology Research at Peel Hunt, puts it simply: “Developer productivity, automation of level 1 support, and enhancing marketing throughput” are currently the easiest AI value stories to articulate.
Revenue growth through AI is still harder to prove in most sectors.
There are exceptions, particularly where AI enables entirely new products or fundamentally changes delivery economics, but many organizations are still struggling to move beyond pilots and experimentation into scaled operational impact.
That is partly because implementation remains harder than most organizations expected.
Many businesses still approach AI tactically rather than strategically. Teams are given licences to generative AI tools with little governance, limited operational integration and no clear ownership structure.
Scott highlights this risk directly, warning that many organizations are pursuing fragmented bottom-up adoption without “a dedicated AI lead with the right level of authority and experience to turn this grass roots innovation into scalable and repeatable solutions.”
This is where leadership maturity becomes critical.
AI adoption without governance, operational structure and delivery discipline simply creates noise. Worse, it can create security, compliance and resilience risks that materially damage enterprise value.
There is also a growing misconception that simply adding AI to a product or business model increases valuation. It does not.
Moore makes the point well: “Using AI now should be a standard so the valuation cannot be based on having this anymore.”
That is exactly right.
The market is already moving past superficial AI positioning. Investors are becoming more disciplined about distinguishing between genuine defensible capability and a thin layer sitting on top of third-party models.
Cyber resilience, data quality and execution now shape valuation
Technology capability is not just about growth opportunity. It is also about risk containment.
Cyber security, resilience and operational stability now play directly into value preservation and exit confidence. A major cyber incident, operational failure or regulatory issue can materially damage valuation overnight.
That risk is increasingly recognised during technical due diligence. FTI Consulting highlights how cyber weaknesses can directly undermine enterprise value, particularly where investors underestimate operational resilience and governance maturity.
It becomes even more important in AI-enabled organizations where the threat surface is increasing rapidly.
Jayaweera highlights that AI has “increased the threat surface, added to cost uncertainty and brought into question the value of the system of record.”
He also makes an excellent point around what he calls “token-tax”. Cloud cost models were relatively predictable. AI consumption models are far less mature and far harder to forecast operationally.
That uncertainty matters for investors.
It also reinforces why strong data governance, architecture and operational discipline are becoming increasingly important components of due diligence.
The organizations creating the strongest enterprise value today are not necessarily the ones making the most noise about AI. They are the ones building scalable operating models underneath it.
That includes:
- High-quality operational data
- Scalable platforms
- Resilient infrastructure
- Embedded governance
- Mature engineering practices
- Operational execution capability
- Strong cyber resilience
- Clear ownership and accountability
Those foundations increasingly determine whether AI becomes commercially useful or simply another expensive experiment.
The same is true at exit.
Buyers are not paying premiums simply because a business claims to have AI capability. They pay premiums where technology capability shows up in measurable business outcomes — stronger retention, better margins, operational scalability, automation, pricing power and defensible market position.
As Scott notes, AI and data capability influence valuation “when it shows up in the quality of revenue and the exit story.”
That is the key point many organizations still underestimate.
Technology capability is no longer separate from enterprise value. Increasingly, it is enterprise value.
The businesses that execute fastest will win
The private equity firms creating the strongest returns over the next decade are unlikely to be the ones simply investing the most capital. They will be the firms that best understand how technology, data, AI and operational execution combine to accelerate enterprise value creation.
That means looking beyond surface-level AI narratives and understanding the deeper operational mechanics underneath the business.
It means assessing whether leadership teams can execute transformation at pace. Whether operational structures can scale. Whether data quality is fit for purpose. Whether cyber resilience is mature enough to protect enterprise value. Whether technology architecture enables growth rather than slowing it down.
Most importantly, it means recognising that technology is no longer just a support capability.
The PE firms that understand this earliest — and execute against it fastest — will outperform the market over the next decade.
As Jayaweera puts it succinctly: “AI is technology. And technology is going to eat more of the world.”
This article is published as part of the Foundry Expert Contributor Network.
Want to join?