The best PE firms don’t buy companies.

They build compounding engines.

Buying is the easy part. There’s a banker, a CIM, a competitive process, and if you’ve got a fund and a decent track record, you’ll probably win something. That’s not the hard bit.

The hard part is what happens after the champagne.
Because the best returns don’t come from clever entry valuations or financial engineering.
They come from building something that compounds. Month over month, year over year.

Great firms understand this.
They don’t think in terms of “value creation initiatives.”
They think in terms of systems.

Systems that:

– Create repeatable, testable go-to-market motions
– Drive operational insight and action from real-time data
– Build executive muscle memory through pattern recognition
– Enable speed without sacrificing governance
– Pull talent into the portfolio faster than the job boards can keep up
– Layer in bolt-ons that actually improve the business, not just the spreadsheet

These firms don’t celebrate integration. They institutionalize it.
They don’t rely on the heroics of a single CEO. They design the organisation so it doesn’t need heroes.
They don’t wait for the next board meeting to intervene. They already know what’s broken, because their systems told them.

That’s what a compounding engine looks like.

It’s not glamorous. It doesn’t make for splashy press releases. But it’s what turns a 2x into a 4x.

And here’s the kicker: most firms say they do this.
Few actually do.

You can spot the difference pretty quickly.
The average firm staffs a junior ops person, hires a CFO, and throws a quarterly deck at the problem.
The best firms treat value creation like capital allocation.
Disciplined, focused, and high-ROI.

So if your post-close strategy is “hire some grown-ups and see what happens,” don’t be surprised when your fund performance looks like a sleepy REIT.

Buying is table stakes.
Building is where the real money’s made.