Welcome to this week's edition of The Private Capital Compass, brought to you by Private Capital Global (PCG), a Sparc Group company. 

In this edition, we explore how the surging U.S. private credit market is redrawing the boundaries between banks and non-bank lenders, reshaping both opportunity and risk across the financial ecosystem.

We also spotlight how private equity firms are rethinking value creation—moving from financial engineering to scalable operational excellence that spans every phase of the deal lifecycle, and how exit readiness has become a defining differentiator for firms seeking premium valuations in a volatile market.

Finally, our deep dive examines how firms are building repeatable, data-driven operating models that turn insight into execution, and execution into sustained outperformance.

Compass Points

Key insights at a glance:

• Private Credit’s Power Shift and Growing Pains: The private credit market, now exceeding $3 trillion globally, is reshaping the financial system and testing its limits. According to a recent Moody’s report, U.S. banks’ exposure to private credit providers has climbed to nearly $300 billion, with total loans to non-bank financial institutions reaching $1.2 trillion. This competitive relationship has banks both funding and rivaling private lenders, blurring the boundaries of traditional credit risk. Recent market turbulence has amplified those concerns: following the Tricolor and First Brands bankruptcies, major institutions like JPMorgan, UBS, and Jefferies disclosed hundreds of millions in losses, sparking a 35% spike in the VIX index and erasing over $100 billion in U.S. bank market value. Yet experts argue that the panic is overstated with many of these failures stemmed from syndicated bank loans, not core private credit exposures. Still, the sector faces rising covenant defaults (up to 3.5%) and growing use of payment-in-kind (PIK) mechanisms, signaling mounting strain. 

• Value Creation at All Deal Stages: As competition and valuations rise, private equity firms are shifting from financial engineering to holistic value creation that spans the full deal lifecycle. Leading investors are developing thesis-driven strategies, expanding diligence to include commercial, operational, and human capital factors, and starting value creation planning before close. Post-deal, the focus turns to execution through operational efficiency, digital enablement, leadership alignment, and real-time KPI tracking. This reflects a broader industry trend toward industrialized value creation  where strategy, data, and people serve as the key levers for building scalable, resilient businesses and driving sustainable returns.

• Exit Readiness: Turning Preparation into Premium Value: With exits slowing amid tight capital, longer hold times, and volatile valuations, private equity firms are rethinking how they prepare portfolio companies for sale. Firms that identify potential weaknesses early, demonstrate market resilience, and articulate clear pathways for growth are commanding higher valuations. AI maturity has emerged as a key differentiator, as investors seek proof of scalable innovation and risk mitigation rather than vague “AI potential.” The broader trend: value at exit is increasingly driven by storytelling backed by substance — blending operational discipline, strategic positioning, and authentic technology enablement to create assets that not only perform today but are built to evolve tomorrow.

• Private Equity’s Next Chapter: Democratization, Discipline, and Differentiation: In a recent conversation between Ion Analytics and VSS Capital Partners’ David Fann, key trends shaping the future of private equity came into sharp focus. The industry’s explosive growth has fueled intense competition and pushed valuations to historic highs, forcing firms to seek new sources of advantage. The lower middle market is emerging as the most attractive arena for outperformance, where inefficiencies and specialization create space for genuine value creation. At the same time, the democratization of capital is accelerating, with private wealth channels now rivaling institutional investors as major funding sources, opening private markets to a broader investor base. Yet, amid this expansion, a wave of consolidation looms as underperforming managers struggle in what Fann called “the hardest fundraising environment ever.” Together, these shifts point to a sector entering a new phase—where success depends on disciplined execution, differentiated capital models, and authentic partnerships that create measurable growth rather than financial engineering.

• MedTech Dealmaking: Structuring for Growth Amid Complexity: In our recent discussion with Dave Kall of McDonald Hopkins, several trends shaping today’s MedTech transaction landscape came to light. As innovation accelerates and regulation tightens, deal success increasingly hinges on structural discipline and legal foresight. Mr. Kall emphasized that MedTech transactions often fail not for lack of innovation, but because of poor early decisions around entity structure, cap table management, and regulatory readiness. Investors now expect founders to have their governance, FDA documentation, IP protection, and data privacy in flawless order before capital commitments. The sector remains strong, particularly in AI-driven diagnostics, remote monitoring, personalized medicine, and robotics, but heightened scrutiny means only the best-prepared companies will capture premium valuations. Mr. Kall also pointed to tax strategy as a hidden lever of value creation—especially through mechanisms like Qualified Small Business Stock (QSBS) and thoughtful equity planning. His message reflects a broader industry trend: in a market defined by innovation and complexity, the winners will be those who treat legal, tax, and compliance infrastructure as growth strategy, not as an afterthought.

• The Rise of Human Capital as the Core of Value Creation — The launch of Civaris Capital Management reflects a defining shift in private equity toward viewing people as the primary source of enterprise value. Founded by Jordan Earnheardt and Patrick Danvers, Civaris centers its investment strategy on optimizing human capital: focusing on how talent is assessed, developed, and organized to drive growth. The firm’s model treats culture, leadership alignment, and workforce performance as measurable, scalable levers of value creation, not soft variables. This approach mirrors a broader industry trend as funds increasingly recognize that in asset-light, service-based sectors, human capital is the value chain. As traditional operational playbooks give way to talent-first strategies, firms like Civaris are redefining what it means to build competitive advantage by investing not just in companies, but in the people who power them.

Deal Spotlight: Blackstone and TPG's $18.3B Hologic Acquisition Signals Healthcare's Mega-Deal Renaissance

Transaction: Blackstone and TPG have entered a definitive agreement to acquire Hologic, the Marlborough, Massachusetts-based women's health technology leader, for approximately $18.3 billion. Under the deal terms, funds managed by both firms will pay $76 per share in cash plus a non-tradable contingent value right worth up to $3 per share, for a total of approximately $79 per share. The price represents a 46% premium over Hologic's closing price on May 23, the last full trading day before initial sale reports surfaced.

The transaction, expected to close in the first half of 2026, requires approval from Hologic stockholders, regulators, and other customary closing conditions. The Hologic board has unanimously approved the merger agreement and recommends shareholder approval. Blackstone and TPG have secured committed financing from Citi, Bank of America, Barclays, Royal Bank of Canada, and SMBC, with equity commitments from funds advised by both firms sufficient to fund the purchase price and related expenses. Blackstone's private equity strategy for individual investors will participate, while TPG is contributing through TPG Capital, its U.S. and European private equity platform.

Why It Matters: The Blackstone-TPG acquisition of Hologic represents a bellwether for how mega-cap private equity deploys capital at the intersection of secular growth themes, operational sophistication, and partnership-driven value creation.

• Mega-Deals Are Back: At $18.3 billion, this marks one of the largest healthcare technology take-privates in recent years, signaling renewed appetite for jumbo transactions after a period of valuation compression and exit market uncertainty. The 46% premium over pre-deal pricing demonstrates that mega-funds will deploy substantial capital when they identify platforms with defensible market positions and clear value creation pathways. 

• Thesis-Driven Investing in Women's Health: Hologic's focus on breast imaging, diagnostics, and surgical technologies aligns with powerful secular tailwinds: aging populations, increased screening rates, and technological advancement in diagnostic capabilities. The transaction validates women's health as a strategic theme capable of supporting mega-cap valuations.

• The Club Deal as Operational Accelerator: The partnership structure is strategic, not just financial. Blackstone's Life Sciences group brings deep healthcare provider and payer relationships, while TPG contributes healthcare services and technology expertise. This combined platform can accelerate commercial expansion, drive R&D innovation, facilitate strategic M&A, and optimize operations in ways a single sponsor cannot replicate.

• Scale as Competitive Moat: This transaction underscores how mega-cap firms leverage institutional advantages that mid-market players simply cannot match—the ability to write $18 billion equity checks, secure committed financing from multiple bulge-bracket banks, and deploy specialized operational resources.

Deep Dive: How Private Equity is Building Repeatable Engines for Portfolio Performance

With entry multiples remaining elevated and interest rate volatility limiting traditional financial engineering returns, a fundamental transformation is reshaping private equity: top-tier firms are evolving from ad hoc value creation to industrialized, repeatable operating models that activate from initial diligence through exit. The underlying premise is straightforward yet profound: sustained outperformance now flows primarily from operational excellence rather than deal architecture. 

The Emergence of the Chief Value Creation Officer

Perhaps nothing signals this shift more clearly than the proliferation of a role that barely existed a decade ago: the Head of Portfolio Value Creation. Once a niche position at mega-funds, this executive function has now cascaded across the market, from upper-middle market firms to growth equity shops.

These leaders, often recruited from top-tier consulting firms, operational roles at iconic portfolio companies, or corporate transformation functions—sit at the strategic center of the modern PE firm. They oversee cross-functional teams spanning technology transformation, AI integration, commercial excellence, strategic finance, human capital optimization, and M&A integration. Their mandate is ambitious: to build a deployable, reusable operating system that can unlock value at scale.

The best value creation heads operate as internal consultants, strategists, and executors rolled into one. They're responsible for codifying institutional knowledge into playbooks, translating investment theses into 100-day plans, and ensuring that insights from one deal inform every subsequent transaction. This isn't about imposing a one-size-fits-all approach—it's about creating modular frameworks that can be customized to each company's unique context while maintaining consistency in methodology and rigor.

The Rise of Platform Teams and Functional Expertise

Supporting these value creation leaders are increasingly sophisticated platform teams organized around functional domains. Technology and digital transformation groups help portfolio companies modernize legacy systems, migrate to cloud infrastructure, and implement advanced analytics. AI and data science teams identify opportunities for automation, predictive modeling, and decision intelligence. Human capital practices assist with leadership assessment, organizational design, compensation benchmarking, and executive recruiting.

Strategic finance teams have evolved beyond traditional FP&A support to become architects of value creation tracking, building real-time dashboards that connect operational KPIs to financial outcomes. Due diligence assessment practices now probe far deeper than traditional quality of earnings work, conducting commercial, operational, and IT infrastructure deep dives that inform both deal pricing and post-close priorities. Post-acquisition integration specialists deploy proven methodologies to accelerate synergy capture and cultural alignment in add-on transactions.

What distinguishes these platform capabilities from traditional consulting is proximity and continuity. These aren't advisors who parachute in and disappear—they're embedded partners who maintain ongoing relationships with portfolio companies, tracking progress against value creation plans and adapting strategies as market conditions evolve.

Value Creation Across the Deal Lifecycle

The industrialization of value creation is perhaps most evident in how leading firms approach the deal lifecycle itself. The process begins during thesis development and continues through exit preparation.

• Pre-Deal Phase: Investment teams now collaborate closely with value creation professionals to develop granular hypotheses about how operational improvements will drive returns. During diligence, expanded work streams assess technology architecture, commercial capabilities, organizational health, and digital maturity. This isn't just risk mitigation—it's opportunity identification. The output is a preliminary value creation plan that influences deal valuation and negotiation strategy.

• Transaction Phase: Before ink dries on purchase agreements, 100-day plans are finalized, rapid assessment teams are identified, and quick-win initiatives are mapped. Leading firms use this period to build relationships with management, establish governance frameworks, and align on strategic priorities. The goal is to hit the ground running on day one rather than spending months assessing the landscape.

• Post-Close Execution: This is where platform capabilities prove their worth. Portfolio operations teams deploy playbooks covering everything from pricing optimization and sales force effectiveness to procurement transformation and manufacturing excellence. Technology teams drive ERP implementations, cloud migrations, and cybersecurity enhancements. Human capital practices support leadership development, incentive plan design, and organizational restructuring. Critically, execution is tracked through sophisticated performance management systems that provide real-time visibility into operational KPIs, financial metrics, and value creation milestones. This data discipline enables rapid course correction and ensures accountability across portfolio company leadership and fund teams.

• Exit Preparation: As companies mature, value creation focus shifts to exit readiness—cleaning up financials, documenting operational improvements, building investment-grade management teams, and crafting compelling equity stories that command premium valuations.

While mega-funds have spent years building sophisticated portfolio operations platforms, the majority of middle-market and emerging firms remain dangerously under-resourced in this critical capability. Here are some things that you can do today to get started on your value creation journey: 

• Start with honest self-assessment. Does your firm have a dedicated value creation leader with a clear mandate and adequate resources? Can you articulate a repeatable methodology for driving operational improvements across portfolio companies? Do you have specialized capabilities in critical domains like technology transformation, commercial excellence, or AI integration? If you're answering no, you're already behind and the gap is widening.

• Make the first hire count. If you don't yet have a Head of Portfolio Value Creation, this should be your top talent priority. Look for operators who've actually built things, not just advised on them. The best candidates blend consulting rigor with hands-on operational experience and can translate investment theses into executable plans. This person should report directly to senior leadership and have a voice in investment decisions from the earliest stages.

• Build selectively, partner strategically. You don't need to replicate Blackstone's operating platform overnight. Focus on the two or three capabilities that matter most for your deal flow and portfolio composition. If you're backing software companies, prioritize technology and go-to-market expertise. If you're in industrial businesses, lead with operational excellence and supply chain optimization. For capabilities you use episodically, develop trusted external partnerships rather than hiring full-time staff.

• Codify what's already working. Many firms possess institutional knowledge that's trapped in the heads of individual partners. Start documenting your most successful value creation initiatives. What drove revenue growth at your best-performing SaaS company? How did you transform operations at that manufacturing business? Build simple playbooks that capture these insights and make them accessible across your team.

• Integrate value creation into deal process. Stop treating operational diligence as an afterthought. Require preliminary value creation plans before IC approval. Use 100-day plans as investment decision tools, not post-close exercises. Make operational KPIs as important as financial metrics in portfolio monitoring.

• Invest before you have to. The firms building value creation capabilities today will win better deals tomorrow and generate superior returns throughout the cycle. Those waiting for the next downturn to force their hand will find themselves scrambling to catch up while their competition pulls ahead.

Opening & Closing Remarks from Erik Boender, Vice President & COO, Private Capital Global (a Sparc Group company)

Thank you for reading this week’s edition of The Private Capital Compass. At PCG, we believe navigating this environment requires a combination of strategic deployment, disciplined exits, and operational resilience. From AI-driven dealmaking and healthcare transformation to emerging investments in sports and professional services, these themes are shaping the next wave of value creation.

That’s why we continue to bring together leading voices in private capital through invitation-only events in Austin, Boston, Chicago, Miami, New York, and San Francisco, where operators, sponsors, and investors exchange insights on market trends, technology integration, and human capital strategies. Subscribe to The Private Capital Insiders podcast, hosted by Frank Scarpelli, to hear directly from industry experts and dealmakers navigating today’s evolving market.

We look forward to keeping you informed, inspired, and equipped to turn insight into action across your portfolios and investments.