AlixPartners Finds A Growing Divide Between PE Firms And Portco Leaders
April 24, 2025 – A recent report by AlixPartners – the Tenth Annual PE Leadership Survey – reveals a striking disconnect between private equity firms and their portfolio companies. While both groups agree that growth, margin expansion, and value creation are top priorities, they diverge significantly in how they view performance and leadership quality.
According to the survey, 41 percent of PE executives say the quality of portco senior leadership is a significant challenge, compared to just 13 percent of portco leaders. Additionally, 51 percent of PE leaders say financial performance is a frequent source of tension with portcos, especially around meeting targets on tight timelines.
The gap is especially clear in how each side rates leadership effectiveness. Only 10% of PE firms say portco leadership gives them a competitive advantage, while 43 percent of portco leaders believe their teams do. This disconnect in perceived capability is contributing to execution gaps, and increasing pressure across the board.
The Growing Divide
The survey reveals that while PE firms focus on capital allocation and efficiency, portco leaders are managing on-the-ground execution, often under relentless timelines.
This tension plays out in areas like AI adoption. PE leaders prioritize AI for operational efficiency, while portcos favor growth-related use cases like sales, marketing, and customer insights. “Portcos say growth-enhancing activities … outweigh cost measures by almost two to one. By contrast … PE firms want their portcos to emphasize efficiency over growth.”
The same goes for inorganic growth. Despite most PE strategies relying on add-ons and roll-ups, portco executives are 2.5 times more likely than their investors to say that executing inorganic growth is a major challenge. The strain of integration, from culture to systems to team structures, lands heavily on portfolio leadership.
Inside the Pressure Cooker
PE-backed executives are facing a level of pressure few in the corporate world experience. According to the data, 47 percent of portco leaders expect to make significant business model changes in the coming year, compared to just 27 percent of non-PE-backed leaders. Nearly 70 percent will pursue material acquisitions, and they’re also more likely to be driving geographical expansion, capital restructuring, and divestitures.
Related: The AI Operating Partner: The Latest PE Portfolio Value Creation Role?
“Portco leaders are likely to be asked to do more difficult things than their peers in public or other private companies,” the report noted. It is no surprise then that 61 percent of portco executives say it is increasingly difficult to know which disruptive forces to prioritize. And while 91 percent want to stay for the long haul, many are signaling they need greater support.
Leadership Infrastructure Catching Up
The rise of human capital partners and CHROs in PE is one of the report’s most notable developments. This year, 62 percent of PE firms now have human capital partners, and 50 percent of portcos have a CHRO. Firms with these roles report better succession planning, more positive leadership assessments, and less unplanned CEO turnover.
Related: A Private Equity Blueprint To Secure High-Impact Leaders
At firms with human capital partners, CEO turnover is planned 56 percent of the time, compared to 44 percent at firms without. “CEO exits are slightly more likely to happen quickly when a human capital partner is on staff, which is a good thing,” the report states. Leadership transitions are smoother, and conversations about capability are more strategic.
Leading and Scaling with Talent
Talent has become the cornerstone of value creation in private equity, shaping the success of portfolio companies and driving superior returns. As traditional levers like financial engineering and cost optimization face diminishing returns, private equity firms are increasingly focused on leadership and operational excellence to unlock growth. The role of talent leaders has never been more critical—they are the architects of transformative strategies, aligning people and processes to maximize organizational potential and achieve sustainable scalability.
Hunt Scanlon Media is convening hundreds of operating partners, chief talent officers, and executive recruiters at the Harvard Club in New York on May 15, 2025. We will examine the vital role talent professionals play in driving value creation—from shaping investment strategies and operational initiatives to fostering leadership excellence and organizational growth.
Still, gaps remain. Only 46 percent of PE firms say they discuss succession regularly, and 42 percent of portco leaders report ongoing CEO turnover well after the deal closes. Communication also remains a tension point, 42 percent of portco leaders say communication with their PE firm causes friction, but only 15 percent of PE executives acknowledge the same.
A Call to Action
“Effective leadership is the strongest lever for value creation in private equity,” concludes AlixPartners in its report. And that means action. The report calls for structured leadership assessments, shared performance roadmaps, greater investment in learning and development, and consistent dialogue around culture.
Ted Bililies, global head of transformative leadership at AlixPartners, summarizes it well: “Transformative leaders understand that without deep and continuous change at the human level, the organization will be much less successful at navigating the waves of disruption ahead.”
As the stakes rise in 2025, firms that embrace talent as a core value driver, and not just a support function, will be the ones best positioned to outperform.
Reprinted from with permission from ExitUp!
Contributed by Scott A. Scanlon, Co-CEO, Leo Cummings, Editor-in-Chief, ExitUp
