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

This week, the private capital landscape is moving on several fronts simultaneously: a landmark corporate carve-out, a potential AI distribution deal that could reshape how PE firms deploy technology across portfolios, and a pair of major institutional outlooks that offer pointed guidance on where returns will come from and where they won't.

In this edition, we examine Monomoy Capital Partners' $1.3 billion acquisition of Jiffy Lube International from Shell, a transaction that signals the continued momentum of corporate divestitures as a deal source in 2026. We also cover reports on Anthropic's joint-venture discussions with Blackstone and Hellman & Friedman. 

We take a deeper look at KKR and Hamilton Lane's latest institutional outlooks, both of which make the case that operational alpha, manager quality, and strategic diversification matter more than ever as public market returns compress. We cover S&P Global's data on record venture capital flows into defense technology, EY's argument that most portfolio company finance transformations are solving the wrong problem, and our Deep Dive this week draws on a guest post from GTM strategist Brian Gustason on how Operating Partners can architect a revenue engine that holds up at exit.

Compass Points

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

• KKR's 2026 PE Outlook: In a 2026 outlook published this week, KKR makes a direct case for private equity as public market returns compress and stock-bond correlations rise. The firm's central thesis — what it calls "High Grading" — argues that as multiple expansion fades, the illiquidity premium and active ownership become more valuable, not less. KKR notes that PE has historically delivered its strongest relative outperformance during periods of modest public market returns, which is precisely what their forecasts now imply. On manager selection, the firm is unusually direct: return dispersion between the top and bottom quartiles of PE managers is more than twice that of active public equity managers, persistence is weakening, and nearly 40% of above-median funds underperform in the subsequent vintage. The "who" matters more than the "what." On alpha generation, the message is equally clear — since the Global Financial Crisis, operational improvement has increasingly displaced financial engineering as the primary return driver, and in a higher-rate environment, execution is the only reliable edge.

  PCG Take: For GPs, the persistence data alone should reframe how LP conversations are conducted in 2026 — relationship-driven manager selection is a liability when the data shows top-quartile status is this difficult to maintain. For operating partners, KKR's framing confirms what the best firms already practice: the ability to genuinely improve businesses is now the core competency, not access to cheap debt.

• Why Portfolio Company CFOs Are Now Value Creation Architects: In a recent EY article, principals Kevin Brown and Anthony Prandini argue that most private equity finance transformations are solving the wrong problem. The efficiency gains achieved through process modernization, faster closes, cleaner data, and leaner cost structures have narrowed what they call the "efficiency gap" — but left the "enterprise value creation gap" largely untouched. The distinction matters: finance teams have become better at capturing and reporting information, but not at translating it into pricing, cost-to-serve, and growth decisions that actually drive valuation at exit. The authors frame the future finance function not as a process operator but as an adaptive, insight-driven platform — one that connects strategy, operations, and investment through a unified data backbone and positions the CFO as the architect of the value creation plan rather than its scorekeeper. On AI specifically, EY's position is measured: embedded thoughtfully, it can compress cycle times and enhance decision quality across the hold period, but without clear governance, it risks amplifying noise and automating bias. The core reframe is one of agility over accuracy — in today's deal environment, the ability to reallocate capital, adjust pricing, and protect margins in real time defines performance more than reporting precision ever could.

  PCG Take: EY's framework puts language around something the best operating partners already intuitively understand: a portfolio company's finance function that only looks backward is a liability, not an asset. For sponsors underwriting value-creation plans, the question worth asking for every platform and add-on isn't whether the finance team can close the books — it's whether they can generate the forward-looking insight needed to make decisions at deal speed. That bar has risen materially as AI compresses execution timelines from months to weeks. CFOs who can operate as true insight partners, connecting operational data to EBITDA and cash impact in real time, are increasingly the difference between a value creation plan that executes and one that drifts. GP and operating partner teams should evaluate finance leadership against that standard from day one of ownership.

• How Defense Tech Became VC's Hottest Sector: Venture capital investment in defense technology reached record levels in 2025, according to S&P Global Market Intelligence data, with funding rounds totaling $29 billion — nearly triple the 2020 figure — and the number of VC transactions climbing to 629, up from 414 five years prior. The surge is being driven by a new generation of defense-focused startups commercializing capabilities in autonomy, cybersecurity, space systems, and AI-enabled sensors, as geopolitical volatility and active conflicts in Europe and the Middle East have drawn significant technology talent into the sector. Companies like Anduril Industries, Shield AI, and Stoke Space Technologies secured some of the largest rounds, with Anduril alone reportedly in line for a $4 billion investment from Thrive Capital and Andreessen Horowitz that would value the company at $60 billion. In contrast, traditional aerospace and defense M&A has slowed meaningfully since peaking in 2021, reflecting a market in which most large strategic combinations among legacy suppliers have already occurred. Looking ahead, sustained increases in defense budgets across the U.S. and Europe are expected to keep capital flowing into the sector, while stronger stock prices among incumbent defense contractors could trigger a new wave of acquisitions targeting high-capability startups.

  PCG Take: The surge in defense tech investment presents a distinct but underappreciated opportunity for growth equity and later-stage PE investors who have historically viewed the sector as too relationship-dependent or procurement-cycle-driven to underwrite with confidence. That calculus is shifting. The Palantir blueprint of penetrating a closed government ecosystem through technological differentiation rather than legacy contractor relationships has been validated and is now being replicated at scale

• Hamilton Lane's Case for Rethinking Private Market Portfolio Construction in 2026: Hamilton Lane's 2026 Market Overview makes a pointed argument: private markets are entering a period of structural transformation driven by three converging forces: artificial intelligence, expanding private credit, and a maturing secondaries market. The firm's annual report, authored by executive co-chairman Mario Giannini, frames the current environment not as a cyclical moment but as a genuine reshaping of how capital flows, how portfolios should be constructed, and how managers will be selected going forward. Venture capital has already seen more than half of global deal value tied to AI-related investments as of late 2025. On private credit, the firm pushes back against bubble narratives, describing the current environment as a "silver age", an asset class that has outperformed its public benchmark every year for the past 24 years and continues to strengthen structurally. On secondaries, the supply of opportunities currently exceeds available capital, creating favorable entry pricing for buyers with the conviction to move.

  PCG Take: Hamilton Lane's framing should land with particular weight for PE GPs navigating portfolio construction and LP conversations in 2026. The liquidity overhang is real — slower exits, extended holding periods, and valuation questions tied to 2021-2022-vintage deals aren't resolved yet. But the report's broader signal is one of selective opportunity rather than broad caution.

• Anthropic's Joint Venture Talks Signal a New Distribution Model: According to a report from The Information, Anthropic is in active discussions with a group of private equity firms including Blackstone and Hellman & Friedman, to form an AI-focused joint venture aimed at deploying Claude's technology across their respective portfolio companies. The model under consideration mirrors Palantir's consulting-led approach: embedded implementation support to help businesses actually integrate AI into operations, rather than simply licensing software and stepping back. While the deal remains unfinalized and both Anthropic and Blackstone have not publicly confirmed the discussions, the structure being explored represents a meaningful strategic shift in how frontier AI technology reaches enterprises, using PE firms as distribution channels to hundreds of portfolio companies simultaneously.

  PCG Take: If this joint venture materializes, it reframes PE firms as something they haven't traditionally been: technology distribution infrastructure. For sponsors, the implications cut both ways. On the one hand, a structured Anthropic partnership could accelerate AI adoption across portfolio companies by providing implementation support that most operating teams currently lack. On the other hand, it raises real questions about dependency, differentiation, and cost.

Deal Spotlight:  Monomoy Bets $1.3 Billion, Shell Exits Jiffy Lube

Transaction: Shell's lubricants subsidiary, Pennzoil Quaker State Company, has agreed to sell Jiffy Lube International and its subsidiary Premium Velocity Auto to Monomoy Capital Partners for $1.3 billion. The transaction transfers ownership of one of the most recognized quick-service automotive brands in the United States, including the Jiffy Lube trademark and a network of more than 2,000 franchised and company-owned service centers across the country, as well as licensees in Canada.

Premium Velocity Auto, the second-largest Jiffy Lube franchisee with over 360 locations across 20 states, is included in the deal, giving Monomoy both the franchisor and a significant direct operating footprint from day one. As part of the agreement, Shell entered into a long-term lubricants supply arrangement with Monomoy, ensuring Pennzoil and related Shell lubricant brands retain a commercial relationship with the network going forward. Shell framed the divestiture as a portfolio optimization move. Jiffy Lube accounted for approximately 6.5% of Shell's U.S. and Canada lubricants volume but is outside the company's core focus on lubricant manufacturing, marketing, and distribution. The transaction is expected to close in the second half of 2026, pending regulatory approval.

Why It Matters: This transaction is worth attention for several reasons that extend well beyond the headline price. First, it is a clear signal of where corporate carve-out opportunities exist in 2026. Large energy and industrial conglomerates continue to rationalize non-core assets as they redirect capital toward higher-return priorities — in Shell's case, lubricant manufacturing and energy transition investments. For PE dealmakers, that rationalization cycle is a consistent source of well-branded, operationally established businesses that come with real infrastructure but have often been underleveraged within a larger corporate structure. Jiffy Lube is exactly that kind of asset: a household name with strong consumer awareness, a durable franchise model, and decades of operational history that a focused private equity owner can now optimize without the constraints of a corporate parent.

Second, Monomoy's acquisition reflects a broader thesis around essential consumer services, businesses that serve recurring, non-discretionary needs regardless of macroeconomic conditions. Oil changes don't get deferred indefinitely. The quick-lube category has demonstrated resilience across economic cycles, and a network of 2,000-plus locations with established franchisee relationships represents a defensible, cash-generative platform.

Third, the deal structure itself is instructive. The retention of a long-term lubricant supply agreement with Shell creates an embedded cost and supply-chain certainty for Monomoy while preserving Shell's commercial relationship with the network. It's a clean separation that protects both parties,  the kind of structured transition that makes corporate carve-outs attractive when done thoughtfully.

Deep Dive: Building the Revenue Engine, What You Must Get Right on GTM

In our latest blog post, Brian Gustason, a GTM strategist with deep experience in private equity-backed businesses, makes the case that Operating Partners who develop fluency in go-to-market execution possess one of the highest-leverage value-creation tools available during the hold period. The argument is structured and practical: most OPs bring genuine depth in finance, operations, talent, or integration, but modern commercial environments demand a different kind of pattern recognition, one built around how Marketing, Sales, and Customer Success function as an interconnected system.

The Structural Gap Operating Partners Can't Ignore

The core tension Gustason identifies is about misalignment. Today's buyers arrive informed, often deep into their evaluation before sales ever engages. Buying committees have expanded. Decision cycles have lengthened. Competitive messaging gets replicated quickly, eroding differentiation. And yet investment thesis growth assumptions remain unchanged. The commercial engine is still expected to scale within a finite hold period and deliver durable, demonstrable growth to the next acquirer. That gap between how buyers actually behave and how growth is modeled occurs is where value-creation risk concentrates.

The Starting Point: What You'll Find at Most Portfolio Companies

Walk into most lower-middle-market portfolio companies, and the picture is familiar: founder-led selling, fragmented customer data, a marketing function operating primarily as a lead-generation unit, and a sales process shaped by legacy habits and tribal knowledge. Forecasting runs on intuition. None of this is a failing; it's the natural state of founder-built businesses transitioning to institutional ownership. But it creates a defined set of problems that require deliberate intervention.

Before any GTM lever is pulled, Gustason is clear: data integrity comes first. Customer and pipeline data must be cleaned, reconciled, and validated. Optimizing on top of incomplete or inconsistent information is a misdirected investment. This is what he calls Step 0 — not glamorous, but foundational to everything that follows.

The 80/20 Framework: Where the Leverage Actually Lives

The GTM landscape is crowded with possible initiatives, messaging overhauls, CRM implementations, pricing adjustments, and training programs. The risk is diffusion. Gustason's argument is that a small number of levers drive most of the growth acceleration, and Operating Partners who understand this can orchestrate resources toward impact rather than activity.

His framework identifies six interconnected focus areas. Revenue engine health, pipeline quality, conversion rates, deal velocity, and quota attainment must be assessed early to surface structural fragility before it becomes a hold-period problem. Ideal Customer Profile discipline ensures that sales and marketing resources concentrate in segments with the highest win rates, deal sizes, and retention. Positioning must be aligned before investing in pipeline generation; when it isn't, pricing becomes the default battleground and sales cycles lengthen.

Marketing and sales alignment creates shared accountability and more predictable demand generation. Building a sales motion that doesn't depend on a small number of individuals, often including the founder, is essential for scalability and buyer confidence at exit. And treating retention and expansion as a growth strategy, rather than an afterthought, signals to the next acquirer that revenue is durable.

The Rollup Dimension

For Operating Partners managing platform or rollup strategies, Gustason adds important nuance. Each acquisition arrives with its own ICP assumptions, CRM configuration, and sales process. Without deliberate GTM integration, complexity compounds, and the platform thesis erodes. High-performing rollup strategies treat GTM integration with the same rigor as operational or financial integration — unified ICP, aligned positioning, standardized sales processes, and clear account ownership from the outset.

What the Next Buyer Is Actually Evaluating

The final audience for all of this work is the next acquirer. Premium multiples don't get paid for historical growth; they're paid for confidence that growth will continue independently of the individuals who drove it. Buyers are evaluating systems: clear ICP, reliable pipeline generation, productive and scalable teams, and strong net revenue retention.

Operating Partners who architect that system during the hold period don't just prepare the business for sale, they materially improve the probability of a premium outcome. As Gustason frames it, the challenge isn't a shortage of GTM initiatives. It's the discipline to identify the highest-value levers and the pattern recognition to act on them early enough to make a difference.

The dealmaking environment in 2026 rewards conviction. With dry powder levels still elevated, competition for quality assets remains intense, and generalist positioning is becoming a liability. The firms gaining ground aren't casting wide nets. They're moving with speed and credibility into sectors where structural tailwinds, valuation resets, and operational complexity create durable return potential.

Two sectors stand out with particular clarity heading into the year.

Medtech continues to attract serious PE attention for good reason. An aging population, persistent pressure on hospital systems to reduce costs through better technology, and a deep pipeline of founder-owned device and diagnostics businesses create a consistent flow of deals. Valuations have moderated from their post-pandemic peaks, and the regulatory environment is navigable for sponsors who build genuine domain expertise. The businesses that require real operational improvement are exactly where PE adds its most defensible value.

Industrial and manufacturing are experiencing a quieter but equally compelling resurgence. Reshoring tailwinds, infrastructure investment, and supply chain reconfiguration are driving demand for domestic manufacturers that were previously overlooked. Many of these are founder-led, operationally underleveraged, and receptive to institutional capital that comes with genuine operational support.

A third sector worth watching: tech-enabled services businesses serving regulated industries — healthcare administration, financial compliance, and government contracting. Sticky revenue, mission-critical positioning, and strong retention profiles make these assets compelling at the right basis.

Closing Remarks

Thank you for reading this week’s edition of The Private Capital Compass. Throughout 2026, PCG will convene investors, operators, and advisors through a growing slate of curated events in Austin, Boston, Chicago, London, New York, and San Francisco, each designed to move beyond surface-level discussion toward practical insights, peer exchange, and real-world application.

Our mission remains consistent: to deliver clear-eyed analysis, relevant intelligence, and informed perspective that helps private capital professionals translate market signals into durable value across deals, portfolios, and platforms.

We appreciate your continued engagement and look forward to navigating the year ahead together.

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