Two groups behind Tom Brady in Ireland
Hey there!
My latest adventures in jet lag saw my pop across to Ireland last week, where I was lucky enough to play some golf. The fourth leaf on my clover fell into place when it transpired that NFL legend Tom Brady was playing a couple of groups in front of me.
For any Brady-haters out there, brace yourselves - his golf swing is an efficient thing of beauty (see below) and...when I asked the caddies afterwards they had nothing but glowing reports to share of his kindness and charm.
No Summer slowdown in evidence here - things seem to accelerating if anything in what have traditionally been harder months to get things done. Maybe this week's heatwave and July 4th / America's 250th celebrations in DC will add some more familiar lag to proceedings.
I've seen the 'AI will kill consulting' bandwagon start to roll a little more again of late with the new models. I don't think I'm being rose-tinted about my opposition to it, though. Anthropic and OpenAI throwing huge sums of money into their own consulting shops tells you all you need to know surely?
More on the nuances underneath that next time, enjoy the rest of this week's memo for now!
Cheers,
Graeme
Three Things I Learned This Week
EY’s new exit study, two findings worth reading together
EY’s Global Private Equity Exit Readiness Study 2026, published June 2 and authored by Konstanze Nardi and Ivan Lehon, is built on responses from 100 GPs and a separate cohort of 100 PE-backed portfolio company executives surveyed February through April 2026. Two findings in the report do most of the work for the conversation I want to have.
The first one. Data quality is no longer getting worse. It is getting better, slowly, and it is still the biggest finance-function challenge to a clean exit. Last year, 72% of GPs named “a robust set of data and KPIs to support historical and forecast trends” as their top finance-function exit constraint. This year that number dropped to 60%. Progress. Real progress. And still the number one challenge by a wide margin. EY puts the explanation simply. The work that is happening is incremental rather than systemic. Companies are getting better at presenting the numbers they have, not better at producing the numbers they need.
Read alongside the broader exit challenge picture. 86% of GPs say preparation improves exit valuations. Roughly half of the firms that started 12 to 24 months before sale reported “much” or “a great deal” of improvement in exit outcomes, against 23% for firms that started 3 to 6 months out. The case for early preparation is now overwhelming and the evidence base is thick.
The second finding is the one almost nobody is going to write about. AI just became the fastest-rising exit challenge in the industry. Last year, 7% of GPs flagged AI as an exit-prep concern. This year 17%. A 2.4x increase year over year. Buyers are now asking whether AI strengthens the investment case or creates new risks, and management teams are struggling to answer. EY puts both findings together in the line worth pinning to the wall of every operating partner’s office.
“Without clean, accessible and well-governed data, AI claims can quickly become difficult to evidence in diligence.”
That is the bridge between the slowest-moving exit problem and the fastest-rising one. The AI strategy you build sits on top of the data foundation you have. The buyer can read both. If the foundation is incomplete, the AI story is not believable. If the AI story is not believable, the equity story has a hole in it. The sponsors that close that gap in the next 12 to 24 months get paid for both.
McKinsey’s late-hold value acceleration confirms why the foundation has to exist early
McKinsey’s Global Private Equity Report 2026 has a finding that should reshape how operating partners sequence their value creation work.
For deals exited since 2019, around 6% of total EBITDA margin improvement was generated in the final year of the hold. Around 4% came in the penultimate year. The years before that contributed roughly 1% per year combined.
Read it the way operating partners need to read it. The bulk of the value capture in a typical hold happens in the final eighteen months. The decisions, the pricing actions, the cost initiatives, the cohort work, the AI deployment, the late-cycle margin push, all of it concentrates at the back end.
That math only works if the data foundation already exists. You cannot run a final-year pricing optimisation against customer cohort data you have not built. You cannot ship a Q3 commercial sprint against churn signals your system does not yet capture. You cannot underwrite the next owner’s continued growth story with a data room that the buyer’s QofE team has to reverse-engineer.
The foundation is built in the first 24 months of a hold, then leaned on hard in the last 24. The middle is the buffer. Most portfolios still treat the foundation work as a year-three problem and the buffer as the work itself. That is the inversion that costs the multiple at exit.
FTI confirmed what every AI-curious operating partner is wondering. The benefit is real now, but only if the foundation exists.
FTI Consulting’s Value Creation Index 2026 surveyed more than 550 senior PE leaders. The headline finding has been quoted everywhere this week, and it is a real shift worth absorbing.
66% of PE leaders now report AI benefits showing up inside twelve months. A year ago that number was 34%. Almost double in a year. The hype cycle has graduated into a deployment cycle, and the firms shipping AI value can prove it.
The buried finding is the one that matters more for portcos. FTI found that high performers are not adopting AI faster than the average. They are embedding it into core value creation levers rather than running it as a standalone “AI initiative.” The difference between an AI workstream that ships value and one that stalls is whether the AI is plumbed directly into commercial, finance, operations, and product, or whether it sits next to those functions on a separate slide in the next operating partner review.
Embedding AI into the levers requires the clean, governed data underneath. The model is a commodity. The deployment is the lever. The data is the foundation. Without the foundation, the AI initiative becomes another roadmap line item that does not move the EBITDA number. With it, the AI becomes the late-hold value compounding mechanism McKinsey just measured.
Three reports. One thesis. Buyers price for evidence. Value creation accelerates at the end. AI works only when embedded. All three rest on the same foundation. The data has to be there twelve to twenty-four months earlier than most operating partners plan for.
Two News Stories From This Week in Mid-Market PE and Data
McKinsey says the data IS the moat now. PE underwriting just changed.
Sources: McKinsey Global Private Equity Report 2026
What happened. McKinsey’s 2026 report makes explicit a shift that has been quietly underway in PE diligence for two years. The firm reports that over the past twelve months, the underwriting focus has moved from broad sector-disruption narratives to a granular assessment of asset quality. McKinsey’s words. Buyers are now underwriting “verifiable competitive moats, data advantages, embedded workflows, and execution capability.” That is a different sentence than the one PE wrote five years ago. The other data point in the report worth registering. Median buyout EBITDA multiples hit a record 11.8x, which sounds like the cycle never broke. The catch is the dispersion underneath. Buyers are paying 11.8x for quality and walking from everything else.
Why you should care. If “data advantages” is now a named underwriting criterion at the largest consultancy in the world, the seller-side implication is direct. A portco that can demonstrate a defensible data asset, clean reporting, and a buyer-readable narrative around it gets paid for that asset specifically. The portco next door with similar revenue and worse data does not get the same multiple. The dispersion in 2026 multiples is no longer about sector. It is about defensibility. Operating partners spending the back half of this year deciding whether to invest in data work in their portcos should read this as a direct buyer signal. The next QofE team is going to look. The next sponsor on the other side of the table is going to discount what they cannot verify. The 11.8x is the prize. Verifiable data is the entry ticket.
2026 looks like the first normalised exit year since the pandemic, and AI is now in one in three software deals
Sources: With Intelligence Outlook 2026, June 17 | Bain Private Equity Midyear Report 2026
What happened. With Intelligence’s June 17 outlook makes a directional case that the exit backlog is finally clearing, slowly rather than spectacularly. Holding periods ticked down for the first time in five years in 2025. IPO activity has held through Q2 2026 despite the broader bid-ask freeze the Bain midyear report flagged. The piece of data buried in the With Intelligence piece that most operating partners have not internalised yet. Roughly one in three software deals now involves AI as a stated component of the transaction. That number was a rounding error two years ago. The market is functioning. It is selective. AI is now part of the underwriting language for a meaningful share of the most active sub-sector.
Why you should care. Read this next to the EY and McKinsey findings above. A selectively functional exit market means more transactions are clearing, but the dispersion between premium and average is sharpening, not narrowing. Buyers are looking. They are paying for clean. They are paying particularly hard for clean plus a defensible AI story in software. A portco where AI is bolted onto a stack the buyer cannot reconcile under diligence is going to underperform a portco where AI is embedded in workflows the data layer supports. The sponsor that gets ahead of this in the next two quarters arrives at exit in front of a buyer who is now actively looking for the thing they have built. The sponsor that waits arrives at the same buyer in a more competitive auction six quarters from now and watches the multiple compress.
Free Tool of the Week - Buyer Scorecard
The other half of exit readiness is the half operating partners spend less time on. Not whether the portco is ready for the buyer, but which buyer the portco should be ready for. The Buyer Scorecard maps your likely buyer universe across strategic, sponsor, and hybrid profiles, scores each against your portco’s specific value drivers, and surfaces which buyer would pay the most for what you actually have. Two minutes. One page. Useful before the next investment committee conversation about exit timing.
Sign-off
If any of this lands and there is something you think we can help with, just reply. We read everything that comes through.
As always, forward this on to your favorite PE-backed friend.
Cheers,
Graeme