The 3 Hidden Execution Gaps Costing PE Firms Millions

Jayven Rappa

In today’s private capital market, the old levers of value creation—cheap debt and multiple expansion—have been pushed to their limits. With high entry multiples, expensive capital, and elongated exit timelines, operational execution has become the true alpha. Yet, across thousands of portfolio companies, silent execution gaps continue to erode value.

 

Research shows that 60–70% of well-formulated strategies fail to deliver1. For PE-backed companies, that failure translates into delayed exits, missed EBITDA targets, and compressed IRRs. The culprit isn’t bad strategy—it’s the hidden flaws in execution.

 

Here are the three execution gaps costing PE firms millions:

 

  1. The Alignment Gap: When Strategy Never Reaches the Frontline

The Problem:
Private equity sponsors craft detailed Value Creation Plans (VCPs), but too often those plans fail to translate into the daily actions of portfolio company employees. Studies show:

  • 95% of employees cannot articulate their company’s strategy2
  • 90% of frontline workers see no connection between their daily tasks and strategic goals3

When alignment breaks down, execution stalls. Teams chase local priorities, leadership changes compound confusion, and the VCP loses momentum.

The Cost:
Misalignment leads to wasted effort, duplicated work, and delayed initiatives—slowing EBITDA growth and reducing enterprise value. In fact, a failed CEO transition alone can cost up to 20x total compensation when factoring in disruption and lost momentum4.

The Fix:

  • Use execution maturity diagnostics (like the Joy Score) pre- and post-deal to measure organizational clarity.
  • Align incentives at every level to strategy execution, not just financial outcomes.
  • Establish a portfolio-wide “control tower” view so sponsors and management share one version of the truth.

 

  1. The Agility Gap: When Execution Moves Slower Than the Market

The Problem:
Markets don’t wait for quarterly board meetings. Yet most portfolio companies still operate with rigid, outdated planning cycles. 70% of large-scale transformations fail, often because they can’t adapt fast enough to shifting priorities5.

The Cost:
Execution delays directly destroy IRR. The math is unforgiving:

  • A buyout delivering 2.5x MOIC in 3 years generates a 35.7% IRR6
  • The same MOIC in 7 years delivers just 14.0% IRR6

Time is the enemy of returns. Without execution velocity, even a “successful” exit produces subpar performance.

The Fix:

  • Implement real-time execution intelligence tools that link leading operational indicators to financial outcomes.
  • Replace static reporting with continuous visibility—surfacing risks before they become value killers.
  • Use AI-driven scenario modeling to stress-test VCPs under different market conditions.

 

  1. The Data Gap: When Insights Stay Siloed and Blind Spots Multiply

The Problem:
Portfolio companies are awash in data, yet much of it is fragmented across systems. Leadership drowns in spreadsheets while frontline teams waste time reconciling information. Studies show 70% of employees spend 20+ hours per week on “gray work”—manual reporting, reconciliation, and rework3.

The Cost:
Data silos create blind spots that lead to poor decisions, delayed reporting, and missed opportunities for EBITDA improvement. They also block PE sponsors from getting timely insights across their portfolio, forcing reactive rather than proactive intervention.

The Fix:

  • Break down silos with a digital execution mirror that integrates financials, operations, and customer data.
  • Move from lagging indicators (quarterly reports) to leading signals (customer churn, process bottlenecks, talent attrition).
  • Deploy conversational AI for investors and management to query execution drivers in real time.

 

The Bottom Line: Execution Alpha as the New Differentiator

Private equity firms don’t lose value because they fail to identify opportunities—they lose it because those opportunities are never fully executed. The three hidden execution gaps—alignment, agility, and data—are the silent killers of value creation.

The solution is Strategic Execution Intelligence (SEI): an investor-grade system that closes these gaps by giving GPs, LPs, and portfolio leadership real-time visibility into what drives enterprise value.

For firms willing to measure and improve execution maturity, the prize is clear:

  • +1–1.5x higher exit multiples
  • 10–20% faster EBITDA realization
  • A sustainable edge in a crowded, high-multiple market

Execution isn’t just a management problem. It’s the new frontier of value creation in private equity.

 

References

  1. HBR Staff. (n.d.). Executives fail to execute strategy because they’re too internally focused. Harvard Business Review. Retrieved August 27, 2025, from https://hbr.org
  2. Corporate Finance Institute. (n.d.). Corporate strategy breakdown: Key statistics. Corporate Finance Institute. Retrieved August 27, 2025, from https://corporatefinanceinstitute.com
  3. Warren, K. (n.d.). Do 9 out of 10 strategies fail? Excitant. Retrieved August 27, 2025, from https://www.excitant.co.uk/do-9-out-of-10-strategies-fail/
  4. PrimeGenesis. (2019, June). 20x: The impact of failed leaders in private equity backed companies. PrimeGenesis. Retrieved August 27, 2025, from https://www.primegenesis.com/our-blog/2019/06/impact-of-failed-leaders-in-private-equity/
  5. Mi3 Staff. (2023, October 22). 70 per cent of business transformations fail. Mi3. Retrieved August 27, 2025, from https://www.mi-3.com.au/22-10-2023/70-per-cent-of-business-transformations-fail
  6. Neoform Partners. (2025). McKinsey global private markets report 2025. Neoform Partners. Retrieved August 27, 2025, from https://neoform.partners/mckinsey-global-private-markets-report-2025/

 

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