A businessman strategically moving chess pieces on a board

Staging the portfolio company to maximize exit valuations

Photographic potrait of Derek Steinhiser
Derek Steinhiser

EY Americas Private Equity Assurance Advisory Leader and EY Americas Deputy Leader, Financial Accounting Advisory Services

8 minute read 18 Nov 2025
Related topics
Private equity
Financial accounting advisory services
IPO
Strategy by EY-Parthenon

Achieving successful exits relies on a compelling value creation narrative, which can significantly influence exit valuations.

In brief:

  • Early, thorough preparation and a clear strategic narrative are essential for maximizing portfolio company exit valuations.
  • Integrating value optimization with robust data and management alignment helps firms stand out and attract premium offers.
  • Buyer-centric positioning and evidence of sustainable improvements increase confidence and competitiveness in the exit process.

How EY can help

The exit window is opening for portfolio companies that can demonstrate both exit readiness and value optimization. But are you fully prepared to tell your company’s value creation story?

 

With more than US$1.6 trillion in portfolio company (PortCo) assets held for four years or more, private equity (PE) firms are urgently focused on returning capital to their investors.1

 

But buyer expectations of value creation have increased while overall deal multiples have declined, driving a critical need for PE firms to prove how they’ve elevated the PortCo’s worth during the hold period. As the average holding period has increased by 26% in the past five years, there is a sizable backlog of assets that are now in line for an exit window that is just starting to open.2

 

Are PE firms adequately prepared to realize the full value of their original investment and deal thesis? What if an exit-ready mindset from the time of acquisition is only half the story?

 

In this crowded macroeconomic environment, how can you make your asset stand out?

 

PortCos need to adopt a value creation-driven approach to exits by integrating the value optimization strategy with tactical value delivery initiatives that show tangible value realization — or structured exit value optimization (EVO).

 

In essence, EVO is a combination of strategic narrative building, thorough preparation and buyer-centric positioning — all fact-based and grounded in numbers that tell a compelling story of growth, value realized and growth potential.

 

Firms that prepare their assets for sale early and position their value creation improvements in a compelling EVO narrative will have an edge in attracting top-dollar offers and, in some cases, attracting any offers at all.

 

The EY Private Equity Readiness Study 2025 highlights the gaps that EVO addresses in the exit planning process

 

The EY Private Equity Exit Readiness Study 2025 provides insights into PE firms’ current exit preparation practices, exit readiness challenges and their impact on exit valuation.

 

The EY organization surveyed 100 PE professionals from firms headquartered in the Americas and EMEIA, ranging from US$5b to more than US$100b in assets under management. Respondents comprised 47% vice president deal professionals, 29% managing directors and 24% operating partners.

 

The study strongly reinforces the critical need for exit value optimization ahead of exit readiness, revealing:

 

  • 93% of firms report exit preparation initiatives led to some, much or a great deal of improvement to exit valuations on average.
  • 88% of firms aim to exit a given asset within a year (33%) or one to two years (55%).
  • 65% of firms find capturing value creation initiatives in exit EBITDA to be the greatest exit challenge.
  • 72% of firms report having robust data and KPIs as the biggest issue facing the finance function.
  • 66% of firms report that when exits didn’t go well, they would focus on preparing management better in the future.

 

Overall, PE firms prioritized three key areas to improve exits: value creation initiatives being captured in EBITDA, data readiness and granularity and management preparation. These challenges are well known in the PE realm, where a narrow focus on exit readiness alone may leave money on the table. Exit value optimization can make the difference between expected and exceptional. It can be a dealmaker or deal-breaker, based on how effectively the following steps are executed.

Crafting a strategic narrative for exit value optimization

EVO involves crafting a nuanced narrative around three messages: the PortCo’s value maintained, the new value created during the holding period and the future value potential through investments made and investments forecasted.

Grounding the narrative in facts, supported by data, makes the narrative tangible to buyers and a few proof-of-concept successes or transformation pilots provide evidence of a PortCo’s ability to drive and deliver value creation initiatives. These show that the company not only has future potential, but also a proven ability to execute improvements.

The value optimization story must be supported with:

  • A deal narrative that attracts buyers with a compelling investment thesis
  • Accurate and clean data and KPIs that facilitate transparency and trust
  • A strategic roadmap that instills confidence and serves as a solid basis for valuation
  • Prepared management that demonstrates the three Cs: competence (individually), competitiveness (externally) and collaboration (internally)

“It is not financial engineering,” says Derek Steinhiser, EY Americas Private Equity Assurance Advisory Leader and EY Americas Deputy Leader, Financial Accounting Advisory Services. “There is operational engineering that has to be done during the holding period to demonstrate to potential buyers that real effort went into improving the enterprise.”

How EVO helped improve EBITDA by more than 150%

A beverage company sought to identify opportunities to increase efficiency and optimize costs. Through a rapid assessment initiative, EY PE teams conducted a comprehensive evaluation, providing critical insights into the company’s operations.

A five-month strategic sourcing improvement program was launched, designed to streamline key processes that led to new sourcing strategies being implemented.

Within six months, the beverage company achieved 12% cost savings, significantly contributing to the company’s bottom line. The savings from strategic sourcing efforts across multiple categories helped improve the company’s EBITDA by over 150%.

This success not only provided immediate financial benefits, but also laid the foundation for more sustainable, long-term growth and a more confident exit narrative.

How EY can help

  • Private equity portfolio company value creation services

    Value creation is at the core of every transaction investment thesis. Our team supports private equity firms throughout the investment lifecycle from origination to exit. We bring deep sector, operational and functional experience to identify investment risks and opportunities focused on cash and profit levers to make an investment successful.

    Read more

Robust preparation: start early for enterprise-wide PortCo value creation

Maximizing a PortCo’s exit value requires robust preparation and often significant behind-the-scenes improvements long before the sale process begins. Starting as early as possible, even 12 to 18 months prior to the desired exit, is crucial as lead time allows you to implement changes and shore up any weaknesses, with the benefit showing up in EBITDA and other company fundamentals.

 

Begin by conducting a thorough review of the business well ahead of the sale — an unbiased, critical assessment of the company’s market position, operations, financials and legal position to uncover any problems that a buyer’s due diligence would eventually find. Identify the potential issues that might create buyer concerns, leading to diminished offers — and tackle these head-on before going to market.

 

If there is a potential weakness that can’t be fully remediated before the exit (such as a legacy IT system that needs to be upgraded), prepare a credible plan to address it. Show buyers that you are aware of the issue and have a roadmap for improvement — so it won’t slow you down.

 

EVO is a 360-degree assessment and that’s what makes the difference between a good exit and a great exit.

How EVO drove sustainable change and resurrected an exit

A PE PortCo underwent a failed exit process and engaged our Value Creation practice to remediate buyer-perceived shortcomings. Gathering relevant data on current operational processes, top-line performance, governance, KPIs and metrics identified new opportunities for growth, labor efficiency, forecasting and operating model optimization.

The result was a roadmap for 65% EBITDA improvement over three years. Additionally, the company culture sustainably shifted to customer centricity. When the time was right to sell the business, EY professionals worked with the company’s management to develop sell-side materials to support favorable EBITDA adjustments during the deal process.

Buyer-centric positioning: think like a buyer to attract a buyer

The final piece of the puzzle is to position your company squarely in line with what your buyers value most. View your company through the eyes of likely acquirers and prepare to address their top priorities. The goal is to mitigate buyer anxieties and remove question marks as much as possible. This includes managing the sale process and communications as well.

Successful execution of the EVO strategy requires a coordinated approach across the deal partner and team, the general or operating partner and the PortCo C-suite.

Enhance exit valuation with a systemic and proven approach to value creation

Approaching the exit of a PortCo is all about combining a compelling strategic narrative, thorough preparation and buyer-focused positioning to make your business as attractive as possible to buyers. There are no shortcuts or silver bullets here — window dressing a business at the last minute prior to an exit could leave money on the table. The real work of EVO occurs in the months and quarters leading up to an exit, through careful planning and execution.

Buyers tend to compete for a company that is well run, well positioned in the market and able to demonstrate a convincing story of past and future value creation. Assets that are positioned with a fundamentals-driven approach of value creation attract a premium valuation.

“Being exit ready is not enough. It is critical to show how the asset has performed during the holding period,” says Nitin Magoo, Principal, Strategy and Transactions, EY-Parthenon, Ernst & Young LLP. “How has revenue grown? How were operational capabilities enhanced? Has EBITDA increased sustainably? Where does value creation come from next?”

In the end, PortCo exit value optimization isn’t a cosmetic exercise — it is a holistic value maximization approach.

Denise Gilroy, Anshuman Kumar and Nitin Magoo co-authored this article.


EY Private Equity Exit Readiness Study 2025

Please fill out the form below to access the full study report.

Download now

Summary

Private equity firms face mounting pressure to prove value creation as they prepare portfolio companies for exit. Success hinges on early, robust preparation, a compelling strategic narrative and buyer-centric positioning. By integrating value optimization with clear data and management alignment, firms can maximize exit valuations and stand out in a competitive market. A holistic approach to exit value optimization drives sustainable growth and premium offers.

About this article

Photographic potrait of Derek Steinhiser
Derek Steinhiser
EY Americas Private Equity Assurance Advisory Leader and EY Americas Deputy Leader, Financial Accounting Advisory Services
Melding Midwest roots and a longstanding NYC footprint to bring value to businesses and local communities.
Related topics
Private equity
Financial accounting advisory services
IPO
Strategy by EY-Parthenon

Related articles

What’s next for PE-backed controllers: skills for value creation

Discover how private equity controllers can evolve from traditional roles to strategic leaders, driving value creation.

Derek Steinhiser

How portfolio finance functions can drive more value in private equity

Creating a fit-for-purpose portfolio company finance function is becoming more critical than ever to drive value. Learn more.

Chris Dente + 2

    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.