Startup founders often define value creation through visible markers of progress. Revenue growth, user acquisition, market expansion, and valuation milestones tend to dominate how success is measured. In private equity, value creation is assessed differently, with greater emphasis on leadership quality, execution discipline, and an organization’s ability to perform when plans inevitably break down.
That shift reflects the significant changes in the private equity landscape, according to Scott Estill, Managing Partner at Lancor. Financial engineering once defined the industry, but its impact has diminished as capital has become more competitive and strategies more standardized.
“Private equity used to be about financial engineering — buy a company, take on debt, pay it down, make a return,” Estill says. “But now that everyone knows this part of the playbook and thousands of institutions are chasing the same deals, it stops being a differentiator. Real value creation today comes from operational insight and execution discipline.”
That distinction becomes clear over time. Estill points to situations where two companies of similar size operate in the same industry under comparable market conditions, yet produce very different outcomes during the same ownership period. “We’ve seen it repeatedly,” he says. “Four years later one delivers strong returns and the other falls short. The difference isn’t the financial model but the investor’s ability to partner with operators before closing and the management team’s ability to adapt and execute during the ownership period.”
One of the most common misinterpretations Estill sees among founders and operators involves talent. Underperformance is often attributed to the wrong people in key roles, triggering cycles of leadership turnover that fail to resolve underlying issues.
“The biggest myth I see is that change requires new people,” Estill says. “Often, the reality is that 90% of the people who actually drive value are the same humans who were at the company the entire time. They’re just being directed differently.”
Rather than wholesale replacement, Estill argues that value is unlocked through alignment. That process starts early and focuses on clarity, accountability, and momentum. “Instead of wholesale replacement, real value comes from aligning the existing team, as close to Day 1 of the ownership as possible, around a clear plan,” he says. “That includes converting your loudest critics into believers and generating quick wins that get everyone excited about being on a winning team.”
This operational focus also shapes how private equity evaluates leadership. Winning a competitive auction or paying a premium for an asset may secure a deal, but it does little to ensure long-term success.
“Anyone can overpay to win an auction and all you know for sure is you paid the most,” Estill says. “Doing that doesn’t create value, it does the exact opposite.”
Instead, leadership assessment centers on experience under pressure. “What matters is whether leaders have the scar tissue and muscle memory to navigate complexity,” he explains. “We’re not simply asking if they grew revenue from $10 million to $100 million but rather how they did it, where they failed and how they pivoted when the plan didn’t work.”
That distinction helps explain why so many transactions fall short of expectations. “Two-thirds of all M&A deals destroy value because financial engineering alone doesn’t work,” Estill says. “You need operators who can pull the levers that matter, and that takes real leadership quality and execution discipline, not just spreadsheet wizardry.”
For founders, the lesson extends beyond private equity transactions. Many assume value comes from proving they can execute perfectly against a plan. Estill sees it differently. “Founders often think value comes from proving they can hit every metric in the plan,” he says. “But the reality is that every plan breaks somewhere.”
What matters most is response. “What creates value is demonstrating you have the ability to diagnose what went wrong, pivot quickly and still deliver results,” Estill says. “The best private equity firms look for leaders who’ve been tested, who have the emotional intelligence to lead through uncertainty and who can guide their teams to execute even when the original playbook doesn’t work.”
In an environment where capital is abundant and playbooks are widely shared, private equity increasingly rewards adaptability over perfection. Execution, not engineering, has become the real engine of value creation.
Spencer Hulse is the Editorial Director at Grit Daily. He is responsible for overseeing other editors and writers, day-to-day operations, and covering breaking news.
