The exit drought has made the operating partner the most important person in private equity

The maths that powered two decades of private equity returns has quietly broken. For a generation, buyout performance leaned on three levers: cheap leverage, multiple expansion at exit, and - only in third place - operational improvement. Higher-for-longer interest rates removed the first. Full entry valuations removed most of the second. What remains is the hardest lever and the only one still entirely within a funds control: making the business itself worth more. That single shift is why the operating partner - the person who does that work - has moved from the periphery of a fund to its centre.

The pressure is not a mood; it is measurable. McKinseys Global Private Markets Report 2025 found that the share of limited partners naming distributions to paid-in capital, or DPI, their single most critical performance metric jumped from 8 percent to 21 percent between 2022 and 2025 - two and a half times as many investors putting realised cash above every other number. For the first time since 2015 distributions finally exceeded capital calls, but only barely. Bains 2025 report describes a distribution drought running four years, average holding periods drifting toward seven years, and a record stock of unsold portfolio companies waiting for a window that keeps not opening. Investors want cash back; the market is slow to give it.

The consequence for the deal model is blunt. Bain captures it in a phrase - twelve is the new five - meaning a deal now needs roughly double the annual EBITDA growth to clear the same return hurdle it did in the cheap-money years. You cannot buy that growth at entry and you cannot borrow it. You have to build it, quarter by quarter, inside the company. That reframes the operating partner from a value-add garnish sprinkled on at signing into the engine that has to run for the entire length of the hold.

Treating this as a passing squall is the expensive mistake. The pressure is structural, not cyclical. McKinsey notes that the backlog of sponsor-owned companies waiting to sell is now larger - in value, in count, and as a share of total portfolios - than at any point in two decades, and clearing it will take real operating improvement rather than a hopeful wait for multiples to recover. Even when rates ease, the discipline the drought is forcing on general partners will not simply be unlearned, and the buyers on the other side of the next exit will underwrite it just as hard. Funds that build the operational muscle now keep the advantage long after the cycle turns.

Operational value creation is a four-phase discipline, not a first-hundred-days event. Most funds still concentrate their operational firepower at the start of a hold and then let it thin out. In a seven-year hold that is a strategic error - it leaves years two through five, where most of the compounding should happen, under-managed.

Phase one is underwriting the plan, not just the deal. Before signing, the value-creation plan should be specific: which three or four levers will move EBITDA, how much each is worth, who owns them, and what leadership the company is missing. A deal that is underwritten only on the model and not on the plan starts the hold already behind.

Phase two, the first hundred days, installs the operating rhythm. This is where leadership gaps get filled, a short list of key performance indicators replaces vanity metrics, cash discipline is set, and the management team learns how the fund expects to run and report. The goal is not a burst of activity but a system that keeps producing after the initial energy fades.

Phase three - mid-hold reacceleration, years two to five - is the phase almost everyone neglects. This is where the second growth curve is built: pricing and commercial excellence, disciplined buy-and-build integration rather than acquisition for its own sake, margin programmes that survive contact with the organisation, and, when a function stalls or a leader has to change, interim leadership that fixes it in weeks instead of leaving the hold to drift. Value that is not manufactured here does not appear at exit.

Phase four is exit readiness, twelve to eighteen months out. The equity story has to be provable, not merely asserted - clean numbers, a management team that can present, a growth narrative a buyer can underwrite. In a slow market, the assets that clear are the ones prepared long before they are marketed.

This is where Krymax works. Krymax acts alongside funds and their portfolio companies as operating partner and, where a function is broken or a seat is empty, as interim CEO or COO - carrying the value-creation plan, the operating rhythm and the board-level reporting through the whole hold rather than one phase of it. Where a portfolio company is expanding into Europe, the Middle East or Dubai, the same team carries the cross-border build so the growth story is real and not a slide. The method is Swiss in temperament: rigorous, discreet, accountable to the number.

The exit window will eventually reopen; that is not the question. The question is what a fund does with the wait. The general partners who emerge strongest from this cycle will not be the ones who held their breath for a better market - they will be the ones who used the drought to compound operating value, so that when liquidity returns they have something genuinely more valuable to sell. In this regime, value creation is not one lever among several. It is the whole game, and the operating partner is the person who plays it.