PE Beat: No Steep Part Yet

No Steep Part Yet

Pete Stavros has about 250 companies to test on and an outside firm running AI diagnostics across the portfolio. Asked what that produced, KKR's co-head of global private equity declined to sell it. "You know, what I could tell you from our experience is it's helpful, but it is still a long way from transformational." Where it lands in a deal: "it tends to be an incremental lever, not the driver of a deal outcome."

That is the industry talking to itself, not a critic talking to the industry. Six investors at Vista, Hg, Advent, CVC, KKR and Apollo were put the same question and the answers came back flat. Apollo's David Samber noted the category is older than the enthusiasm. "All this existed prior to 22. Like before 22 people called this machine learning. Now people call this AI." His verdict: "It's not a substitute. It's a force multiplier." Hugh MacArthur, who chairs Bain's global private equity practice, closed the same way. "We have not hit that steep portion of the S curve where investment institutions and portfolio companies are being transformed."

The one place it is visibly moving a number is the exit, and not as advertised. Vista's Robert Smith has made it a portfolio-wide mandate, for saleability rather than efficiency. "we've told our teams, every one of our companies has to have an agentic angle to it that actually works, and that's what's actually creating the interest of strategic buyers." Buyers are paying for the capability. Not yet for results it has produced.

So the work goes back where it was. Lee McCabe spent years as an operating partner before founding Claymore Partners, and his diagnosis is that the industry only ever had to be good at governance and can no longer get away with it. Cheap debt and multiple expansion did the rest. What is left mostly means building one source of truth and running attribution back to revenue. The number McCabe keeps returning to is a management one: "I keep coming back to that metric where 70% of CEOs get fired. Before they exit."

Alex Johantgen is that argument executed. He and a partner started a garage door company in 2015 by selling a house and cashing out a retirement account, and are on pace for eight figures. The machinery is an eight-week technician training program, twice-weekly training blocks, a four-tier pay ladder gated on recall rate and close rate, and direct mail matched back to jobs in the CRM. What moved it was seeing the ceiling move. "you don't know what's achievable until you've seen someone else achieve it."

Nobody on the panel claimed a thesis-changing result. The garage door company did not need one.

Sources: Interviews from Dry Powder (Bain) (Sep 1, Pete Stavros of KKR, David Samber of Apollo, Robert Smith of Vista and host Hugh MacArthur of Bain), Private Equity Funcast (Sep 2, Lee McCabe of Claymore Partners; and Aug 31, Angela McCoy of May River), and Think Like an Owner (Sep 1, Alex Johantgen of Rise and Shine Garage Doors).