Welcome to this month's edition of The Private Capital Compass, a curated analysis from Private Capital Global designed to cut through the noise and surface what matters most and what it means for investors and operators.

In this edition, we examine what the research is saying about where private equity edge is most likely to persist in a more competitive and less forgiving market. Apollo's investment team challenges the durability of the traditional middle market advantage. McKinsey makes the case for M&A integration as one of the most important value creation levers available to sponsors today. CBIZ and the National Center for the Middle Market reinforce why the hold period is where exit value is actually built. Grant Thornton puts hard numbers on the gap between AI confidence and AI results across PE portfolios. And Axios reports on the structural move by the industry's largest sponsors to bring genuine AI expertise closer to their operating model.

Our deal of the month is the joint venture between Anthropic, Blackstone, Hellman and Friedman, Goldman Sachs, and a consortium of leading private equity firms to build an AI consulting entity aimed squarely at portfolio company deployment. With $1.5 billion committed and a parallel OpenAI vehicle forming alongside it, this is the most consequential structural development at the intersection of artificial intelligence and private capital in recent memory.

We close with two deep dives drawn from PCG's own convening work. The first examines what practitioners at the 2026 New York Operating Partner and Value Creation Summit revealed about where cross-functional value creation still breaks down in practice. The second captures what the inaugural MedTech Capital Connect Dealmaker Summit in Boston confirmed about the conviction, capital, and sophistication now moving across the full medtech value chain.

Compass Points

PCG’s Recap and Take on the Stories of the Month

• The Middle Market Advantage Is Real. It Is Also Less Reliable Than It Used to Be: A recent piece from Apollo's investment team makes a pointed argument about where private equity edge is most likely to persist in the current environment. The article, authored by senior partners including Co-Heads of Private Equity David Sambur and Matt Nord, challenges the assumption that middle market exposure is structurally advantageous in today's regime. The historical case for the middle market was built on cheaper entry valuations, less competition, leverage amplification, and relatively fast exits. Each of those tailwinds has weakened. Competition for quality middle market assets has intensified, global buyout dry powder now exceeds one trillion dollars, and leverage and multiple expansion, which together accounted for roughly 59 percent of returns between 2010 and 2022, are no longer doing the same work. Exit timelines have lengthened materially, with distributions as a percentage of NAV remaining below 15 percent for a record four consecutive years. In this environment, the Apollo team argues that broad diversification within a single market segment does not create differentiation. It produces median outcomes. Their proposed alternative is a barbell portfolio construction approach that pairs a core sleeve of scaled managers capable of generating repeatable structural alpha with a concentrated sleeve of true specialists who bring differentiated sourcing and sector expertise.

  PCG Take: The Apollo framing cuts directly to a portfolio construction question that LP allocators are increasingly being forced to confront. Segment exposure is not a strategy. In a high-dispersion market where outcomes are diverging more sharply between top and bottom performers, the managers generating above-median results are not doing so because of where they invest. They are doing so because of how they invest, specifically through disciplined underwriting, repeatable operational execution, and the ability to navigate complexity that generalist capital cannot replicate. The barbell framework is a useful lens, but the more actionable implication for both GPs and LPs is that capability matters more than category. Firms that can demonstrate a differentiated value creation system, whether at scale or through genuine specialization, will attract capital. Those positioned as broad middle market generalists without a clear operational edge will find manager selection increasingly working against them.

  Link: Beyond the Middle Market: Private Equity Investing for a More Demanding Regime | Apollo Academy | May 5, 2026

• The Hold Period Is Where Exit Value Is Built: A recent article from CBIZ, drawing on new research from The Ohio State University's National Center for the Middle Market, examines how private equity sponsors can use the hold period more deliberately to drive value creation ahead of exit. The research found that middle market performance is shaped less by size or industry and more by how leaders approach tradeoffs under pressure. High-growth firms were more than twice as likely to report significant efficiency gains from automation and process improvement, and companies with more innovation-forward decision-making reported stronger growth and greater confidence overall. The article identifies two primary levers that separate sponsors who build durable value during the hold period from those who do not: financial visibility and operational modernization. Many portfolio companies still operate with reporting that is too slow, too manual, or too limited to support confident decision-making. When that infrastructure is not in place, sponsors are making consequential decisions without a clear view of where performance is heading or where pressure is building.

  PCG Take: The CBIZ framing reinforces a point that the operating partner community has been making for several years but that many portfolios still have not fully internalized. Exit readiness is not a final-stage sprint. It is the cumulative output of decisions made across the entire hold period. Financial visibility and operational modernization are not cleanup items. They are the foundation on which a credible exit story is built. Buyers are not just evaluating top-line growth. They are evaluating whether the business can sustain performance under new ownership, and weak reporting infrastructure, disconnected systems, and manual processes are exactly the kind of friction that erodes buyer confidence and compresses exit multiples. For operating partners, the practical implication is that the work done in year one and year two of the hold period determines what is possible in year four or five. The sponsors generating the strongest exit outcomes are the ones who treat the hold period as the value creation window it is, not as the interval between signing and the next transaction.

  Link: The Hold Period Advantage: How Private Equity Builds Value Between Signing & Exit | CBIZ | April 24, 2026

• M&A Integration Has Become One of the Most Important Value Creation Levers in Private Equity: A recent McKinsey & Company article examines how private equity firms are using M&A integration as a primary value creation strategy in an environment defined by compressed multiples and extended hold periods. With many sponsors sitting on assets acquired at peak valuations in 2021 and 2022, the ability to improve performance and strategic positioning ahead of exit has become more critical than ever. McKinsey identifies three integration strategies generating the strongest outcomes: rolling up smaller players to capture scale and operational efficiency, combining comparably sized portfolio companies to create larger and more attractive exit assets, and integrating complementary capabilities across a value chain to build differentiated market positions. Across all three, the research is consistent. Integrations that succeed do so because of disciplined execution, clear value propositions, fast process transition, and leadership investment. Those that fail do so because sponsors prioritize deal volume over integration quality, leaving behind fragmented operations, opaque financials, and unrealized synergies.

  PCG Take: The McKinsey framing reinforces something the operating partner community has been living for the past two years. In a market where financial engineering no longer does the heavy lifting, M&A integration has moved from a post-close operational task to a core competency that separates top-quartile sponsors from the rest. The firms generating real returns through roll-ups and combinations are not simply acquiring at low multiples. They are building repeatable integration infrastructure, investing in M&A capability across functional leaders rather than isolating it in a dedicated team, and treating each transaction as a catalyst for operating model transformation rather than a bolt-on addition. For operating partners, the implication is direct. Integration execution is now a value creation discipline that requires the same rigor, governance, and cross-functional coordination as any other element of the playbook.

  Link: How Private Equity is Using M&A Integrations to Overcome Headwinds | McKinsey & Company | May 8, 2026

• Private Equity Is Leading on AI Confidence But Trailing on AI Results: Grant Thornton's 2026 AI Impact Survey of 950 business leaders across nine industries surfaces a pattern that should concern every operating partner with AI initiatives running across their portfolio. Private equity ranks among the most confident sectors on AI strategy, with board-level involvement above average and 80 percent of firms already exploring or piloting agentic AI. The results tell a different story. Only 24 percent of PE respondents report revenue growth from AI, and just 5 percent have fully integrated AI into operations, compared to 14 percent across all industries. The governance infrastructure required to produce measurable returns is where private equity trails most significantly. Only 9 percent of PE respondents are confident they could pass an AI governance audit within 90 days, the lowest rate of any sector surveyed. Only 7 percent have a tested AI incident response plan in place. Buyers, lenders, and LPs are already asking about AI exposure at the portfolio company level, and most firms are not prepared to answer with documented evidence.

  PCG Take: The Grant Thornton data puts a number on something the operating partner community has been sensing for the past twelve to eighteen months. AI activity and AI value creation are not the same thing, and the gap between them is now a tangible exit risk. The firms that have deployed AI broadly across their portfolios without building the governance infrastructure to prove it is working are carrying exposure they cannot see until a counterparty surfaces it during diligence. The path forward is not more pilots. It is building the measurement infrastructure at the portfolio company level before AI scales further, establishing consistent data definitions, clear reporting ownership, and an evidence framework that connects AI activity to financial outcomes. Operating partners who can walk into any portfolio company and answer governance questions from a buyer, lender, or LP with documented evidence will protect exit value. Those who cannot will face valuation friction that is entirely avoidable.

  Link: Private Equity Insights: 2026 AI Impact Survey | Grant Thornton | April 21, 2026

• Private Equity Is Betting on AI from Both Sides of the Table: A recent Axios report by Dan Primack reveals that both Anthropic and OpenAI have completed deals to form AI consulting entities funded by and initially serving large private equity firms. Anthropic's joint venture is seeded with $1.5 billion, with backers including Blackstone, Hellman and Friedman, Goldman Sachs, General Atlantic, Leonard Green, Apollo, GIC, and Sequoia Capital. OpenAI's entity is seeded with $4 billion at a $10 billion pre-money valuation, with roughly 20 investor firms including Bain Capital and TPG, and includes a guaranteed 17.5 percent gain for backers who exit after five years with capped upside. The two structures differ meaningfully, but the strategic logic behind both is the same. Private equity firms are approaching these partnerships as simultaneously offensive and defensive plays. Offensive because these entities could become AI-native versions of major management consulting firms, generating significant investment returns. Defensive because PE firms recognize that bringing genuine AI expertise closer to their operating model is increasingly a requirement for managing existing portfolios and underwriting future ones.

  PCG Take: This is one of the most consequential structural developments in private equity in recent memory, and it deserves to be read as more than a deal announcement. The firms backing these entities are not simply making a financial bet on AI. They are acknowledging that the knowledge gap between what AI can do and what most PE operating teams currently understand about deploying it is wide enough to threaten portfolio value. The defensive framing is the more telling signal. When the largest sponsors in the world are paying for structured access to AI expertise, it is a direct admission that the current operating model inside most firms is not equipped to navigate what is coming. For mid-market sponsors without access to these partnerships, the implication is direct. The gap between AI capability and AI governance inside your portfolio companies is not a technical problem. It is a competitive one, and it is widening.

  Link: Why Private Equity is Making Deals with the AI Agents | Axios | May 5, 2026

Deal Spotlight: Anthropic, Blackstone, and Wall Street's Bet on AI as a Portfolio Operating System

Transaction: Anthropic has announced a joint venture with a consortium of leading private equity and financial institutions to build an AI consulting entity designed to deploy artificial intelligence tools across enterprise businesses, with a particular focus on private equity-backed portfolio companies. Anchoring the deal are Anthropic, Blackstone, and Hellman and Friedman, each committing approximately $300 million. Goldman Sachs is contributing around $150 million, with General Atlantic, Leonard Green, Apollo Global Management, GIC, and Sequoia Capital rounding out the investor group. Total committed capital is expected to reach $1.5 billion. The new entity will function as a consulting arm for Anthropic, helping businesses understand and implement AI across their operations. The announcement follows a parallel effort by OpenAI, which is forming a competing joint venture with its own set of private equity backers, underscoring that both leading AI developers now view PE-backed businesses as a primary enterprise market.

Why It Matters: This transaction represents a structural shift in how private equity intends to address the AI capability gap across its portfolios, and the implications extend well beyond the firms directly involved. The formation of an Anthropic-backed consulting entity is not simply a financial investment. It is an acknowledgment by some of the largest sponsors in the world that deploying AI effectively across a diverse portfolio of companies requires dedicated infrastructure, specialized expertise, and a level of institutional support that most operating teams cannot build independently.

The offensive case is straightforward. An AI-native consulting platform with Anthropic's model capability at its core and private equity's operational reach behind it could become one of the most consequential service businesses in private markets, effectively combining the analytical rigor of a top-tier consulting firm with the deployment speed of a technology company.

The defensive case is more telling. When Blackstone, Hellman and Friedman, Apollo, and Goldman Sachs collectively commit $1.5 billion to secure structured access to AI expertise, it signals that the knowledge gap between AI's current capabilities and what most PE operating teams understand about deploying it is wide enough to represent a real competitive risk. Firms outside this consortium will need to find their own answer to that gap, and the options available to mid-market sponsors without this level of access are considerably more limited.

Link: Wall Street backs $1.5bn Anthropic venture to embed AI in portfolio firms | Published May 6, 2026

Deep Dive I: What the 2026 New York Operating Partner Summit Revealed About the State of Value Creation 

The conversation happening inside the best-performing private equity firms has moved past whether operational value creation matters. What the 2026 Operating Partner and Value Creation Summit in New York surfaced across four sessions was the harder question: why does execution still break down when the infrastructure, the teams, and the commitment are all in place?

The answer that emerged points to the same structural gap across every session. Value creation is still being managed as a set of parallel workstreams rather than a unified operating system. Finance transformation, AI adoption, talent strategy, and employee ownership are each receiving real investment. What remains rare is the cross-functional architecture that connects them into a coherent system from diligence through exit.

Finance: The First Hundred Days as the Proving Ground

The summit opened with a conversation on strategic finance that moved quickly to a core tension in PE finance work. Building a functional operating model requires a capable team, reliable data, and working systems, and these three conditions rarely all exist at close. When one is missing, the operating partner is doing triage rather than value creation. The group was equally direct about where firms overestimate impact. ERP and FP&A investments that look compelling in the investment thesis frequently deliver far less when the organizational capability is not there to absorb them. The CFO profile that emerged pushed well beyond technical competency. Financial literacy is table stakes. What separates a valuable CFO is AI fluency, strategic thinking, and the stakeholder management capacity to serve as a genuine partner to the CEO.

AI: What Actually Worked and What Didn't

The AI session grounded an often aspirational conversation in something more useful. The interventions that held up under scrutiny were not sophisticated. Knowledge bases built for go-to-market teams and data readiness assessments conducted before any deployment began were the highest-impact moves. What consistently failed were fragmented pilots driven by vendor noise and overconfidence in AI's ability to replace core systems of record. The firms that made real progress treated AI deployment as a discipline with governance attached, not an experiment layered onto an already stretched portfolio company.

Employee Ownership: The Change Management Variable

The summit closed with a session on employee ownership that connected directly back to the AI conversation in an unexpected way. Firms that have successfully embedded broad-based ownership programs are seeing faster AI adoption within those portfolio companies. When employees carry genuine stake in outcomes, they engage with transformation initiatives rather than resist them. Change management is an ownership problem as much as it is a technology problem.

The Operating System Gap

The sessions at the 2026 New York summit traced a consistent challenge from multiple angles. The infrastructure for value creation is more developed than at any prior point in the industry's history. The harder work now is building a cross-functional playbook that functions as a single connected system from diligence through exit, rather than a collection of individual initiatives that look more coherent on paper than they operate in practice.

Read the full recap at: The Evolution of the PE Value Creation Playbook | Published May 13, 2026

Compass Call I : Maintaining Your Value Creation Playbook

The operating partner community has spent the better part of a decade building the case for value creation as a core competency. The teams are in place, the playbooks exist, and the commitment is real. What the 2026 New York summit clarified is that winning the argument is not the same as winning the execution.

The firms separating themselves are not adding new initiatives to an already full agenda. They are going back into the playbooks they already have and asking harder questions. Where does finance transformation disconnect from commercial execution? Where does AI deployment lack governance? Where do ownership programs fail to change behavior because employees do not understand how value is measured?

Before your next portfolio review, ask whether your value creation architecture functions as a connected system or a collection of workstreams reporting progress independently. That distinction is where compounding value creation separates from value creation that stalls.