Private Equity Firms Prioritize AI over M&A for 2025 Value Creation.

A recent survey of 500 global private equity decision makers by FTI Consulting found that M&A ranked last among value creation levers, with only 9% naming it their top priority. Instead, conventional cost levers such as supply chain and operations optimization are widely used, while growth strategies remain underutilized. Artificial intelligence is emerging as a top strategic priority and key factor in exit readiness, but is also one of the least frequently used and most challenging to implement.

A recent survey by FTI Consulting, Inc. (NYSE: FCN) has revealed that private equity leaders are shifting their priorities away from mergers and acquisitions (M&A) and towards cost optimization and artificial intelligence (AI) [1]. The 2025 Private Equity Value Creation Index, which surveyed over 500 global private equity decision-makers, found that M&A ranked last among the 10 value creation levers, with only 9% naming it their top priority for 2025.

The survey highlights that while cost levers such as cost structure optimization, supply chain, and operations are widely used and effectively executed, growth strategies remain underutilized or face a clear execution gap. Jiva J. Jagtap, Global Leader of Private Equity at FTI Consulting, stated, "Cost has become the dominant conversation. In a high-uncertainty, low-growth market, cost is often the most immediate lever for protecting value. But cost alone doesn’t deliver returns. High-performing firms treat it as a catalyst, using savings to reinvest in the capabilities and growth engines that drive sustainable value creation."

AI, however, has emerged as a top strategic priority and key factor for exit readiness, signaling its growing importance in positioning portfolio companies for long-term value. Despite its potential, AI remains one of the least frequently used and most challenging levers to implement. Lars Faeste, EMEA Chairman at FTI Consulting, noted, "AI is no longer a futuristic concept—it’s firmly on the agenda for private equity. But intent alone isn’t enough. We’re seeing a clear gap between ambition and execution as firms wrestle with how to move from strategy to impact."

Technology and IT emerged as both the most frequently used and most effective value creation lever, with 84% of respondents using it regularly and 77% rating its effectiveness as above average. However, technology was also cited as the top execution challenge at the portfolio company level.

M&A remains a staple in the value creation toolkit but was rated the worst-performing value creation lever, with 67% of respondents indicating that it takes more than a year to achieve the value they expected. The survey underscores the need for a collective effort from portfolio company leaders, operating partners, and deal teams to ensure strong operational governance, common goals, and clear communications.

The survey findings align with broader trends in the private equity market. Barclays has upgraded CVC Capital Partners (AS:CVC) to "overweight" from "equal weight" due to the persistent challenges in private capital realisations, which have elevated secondaries markets [2]. The secondaries market has grown at a compound annual growth rate (CAGR) of over 14% in the past decade and is projected to continue growing at a 9% CAGR through 2029.

In conclusion, the FTI Consulting survey provides valuable insights into the evolving priorities of private equity firms. As the market faces ongoing uncertainty and low growth, firms are focusing on cost optimization and AI to drive sustainable value creation. However, the survey also highlights the challenges in executing growth strategies and integrating AI into operations.

References:
[1] https://uk.finance.yahoo.com/news/fti-consulting-survey-majority-private-083000182.html
[2] https://www.investing.com/news/stock-market-news/barclays-upgrades-cvc-as-secondaries-surge-amid-private-equity-exit-slowdown-4107124