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Trying to be best practice everywhere is the worst practice of all
Artificial Intelligence is in every business conversation—in private equity (PE) and otherwise—for good reason. Our research and recent survey show that leading firms are investing in AI, but not in the way the headlines might have you believe. The real story isn't about AI's swooping in to 'save the day.' Neither is it about companies that pour money into AI and get little from their investments. It's about how the smartest firms are using AI in targeted, practical ways to get more out of their investments and sharpen their competitive edges.
In just a few months, the AI conversation has shifted from enthusiasm to anxiety. There's growing skepticism—perhaps we should say realism—about AI, and a growing awareness that the road to success begins by identifying the business problem that needs to be solved. Success comes when firms treat AI as a tool, not a strategy in itself, and focus on where it can truly move the needle.
Decades of AlixPartners research on PE leadership show that talent and expertise form the bedrock of value creation. We've seen firsthand that the best results come from coupling AI with human expertise. AlixPartners' handbook Practical AI for Private Equity Operating Partners reveals specific ways PE firms are using this powerful technology to achieve real efficiencies and accelerated value creation.
AI's role: Powerful, but not the whole story
Our research and analysis into best practices in private equity, based on a survey of PE executives confirms that leading firms see AI as important. Eight of the 57 top-rated practices, or one out of seven, is AI related. The highest-scoring best practice? The use of AI across all phases of the investment lifecycle—from searching for potential acquisitions to concluding successful exits. It's a game changer for deal sourcing by helping teams scan mountains of data in seconds, spot trends, and surface opportunities that might slip past even the sharpest analyst. AI has similar value in vetting prospects, due diligence, and post merger integration by enabling those measures to be accomplished much more quickly, so that portfolio company (portco) leadership and operating partners can get on with the work of value creation.
AI is also proving its worth by being able to both predict stress across portfolios and identify growth opportunities for portcos. In the right hands and with the right expert guidance, AI equips operating partners and executives with tools for foresight as well as hindsight, thereby leading to better discussions, better plans, and better outcomes.
Humans are still the reall differentiators
As we highlighted in 'The Human Antidote to AI Hype', what sets leading firms apart from the rest isn't just their investment in AI, but how they blend their investments with human judgment and expertise. The real magic happens in the use of AI to amplify human judgment, not replace it.
Similarly, our survey of leading PE practices found that human capabilities such as advanced talent management, deep industry knowledge, and close collaborations consistently score higher (66-86%) than AI capabilities (58-79%).
Decades of AlixPartners research on PE leadership show that talent and expertise form the bedrock of value creation.
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