Beyond financial leverage: Finding the real fulcrum in PE-backed companies

As leverage becomes more expensive and less forgiving, private equity can no longer rely on capital structure alone to drive returns. Ahead of SuperReturn International and SuperReturn Venture, Julius Bachmann, CEO & Strategic Advisor, Bachmann Catalyst, explores where true value creation now lies and why identifying the right fulcrum, not just the right lever, is the defining challenge for PE-backed companies.

The math has changed - and so has the source of returns

Private equity understands leverage better than any other asset class. After all, it is, quite literally, the business model. A median Debt to EBITDA ratio of 4.9x across the industry (Bain Global PE Report 2025, PitchBook LCD/LSEG) tells you that capital structure remains the default value driver.

For decades, that was enough, but that might change now.

That distinction between having the lever and finding the fulcrum is where most value creation plans fall apart.
Julius Bachmann, Bachmann Catalyst

According to the 2026 Bain Global PE report, “12 is the new 5.” What does that mean and why should you care?

In the 2010s, 5% annual EBITDA growth was sufficient for a 2.5x MOIC over five years. Today, with borrowing costs at 8–9%, debt only covers 30–40% of the purchase price. This requires 10–12% annual EBITDA growth for the same multiple. The math has shifted - and with it, the question of where the real returns come from. What the industry still lacks is a principled way to decide exactly where to intervene.

PE firms have more operational playbooks, more value creation frameworks, and more data than ever. But having the tools is not the same as knowing where to point them. That distinction between having the lever and finding the fulcrum is where most value creation plans fall apart.

Leverage as a principle, not a product

If we reduce the notion of leverage to its core - outsized output, derived from the same input - then capital is just one type of multiplier. One of many. People, systems, market positioning, and reach all follow the same logic. I call these multipliers “leverage types”. PE intuitively has access to more leverage types than it typically deploys. The problem is not a shortage of instruments but of diagnosis.

The problem is not a shortage of instruments but of diagnosis.
Julius Bachmann, Bachmann Catalyst

Most post-acquisition interventions begin with the toolbox: a new CFO, a new ERP, a bolt-on acquisition, a pricing consultant. These are solutions in search of a problem - or, more precisely, solutions applied to the most visible problem rather than the most important one.

The missing step: points before types

Donella Meadows, the MIT systems scientist, proposed a hierarchy of leverage points - places in a system where a small intervention produces disproportionate change. Some are shallow: adjusting parameters, changing numbers, or tweaking incentives. Others are deep: altering the rules of the system, shifting information flows, or changing the goals the system is organised around.

In PE-backed companies, I see this hierarchy play out regularly. Here are three leverage points I encounter most often - ranked from shallow to deep:

1. Pricing architecture.

Not pricing levels, but pricing architecture. A mid-market SaaS company I worked with was leaving 30% of potential revenue on the table because its packaging structure made it impossible for customers to buy what they actually wanted.

Adjusting the architecture (not the price!) unlocked growth that three consecutive sales leadership hires had failed to deliver.

2. M&A architecture.

Acquisitions are almost always framed as leverage - and they are, but at very different depths. Buying a business to replace a struggling services team is the shallow version. Adding a new product to your portfolio that transforms your entire business model and its economics is something categorically different.

The same instrument, pointed at a different place, produces a categorically different result.

3. Leadership.

Replacing an underperforming leader is the obvious move. But in virtually every PE-backed company I have advised, there is a harder decision underneath that one - the decision everyone in the building knows needs to be made, and no one is making.

A co-founder who has outgrown their role.
A strategic direction the CEO never believed in.
A commercial leader the team loves but who has plateaued.

That decision is the real leverage point. And it is almost always the last one anyone touches.

Why shallow fixes disappoint

Fix the pricing architecture with the wrong leader in place, and you have a better-priced company that still cannot execute. Point M&A at the wrong depth, and you have an acquisition that added revenue but left the business model intact.

The pattern I see most often in PE-backed companies is this: the shallower interventions get made, sometimes well, while the deeper ones get deferred.

Capital deployed on the wrong fulcrum does not just produce lower returns.
It produces speed in the wrong direction.
Julius Bachmann, Bachmann Catalyst

Private equity prides itself on being clear-eyed and consequential - and it is, on capital structure, on operational KPIs, on board composition. But the decisions that sit at the real fulcrum of the system - the ones about leadership, about strategic direction, about identity - tend to get drawn out far longer than the math can afford. Not because the people involved lack conviction. Because these decisions are not delegable, they trigger conflict, and they threaten the identity of the person who must make them.

The sequence is the strategy

Here is the discipline I propose: identify the leverage points before you choose the leverage types. Map where the system is actually stuck - not where it is most obviously underperforming. That requires a different kind of awareness: knowing which interventions are shallow and which are deep, and how acting at the right depth creates the conditions for everything else to work.

Capital deployed on the wrong fulcrum does not just produce lower returns. It produces speed in the wrong direction. And speed in the wrong direction is the most expensive mistake in private equity - because by the time you recognise it, you have already burned through precious capital and time.

Three questions before deploying any value‑creation playbook

In practice, it means asking three questions before deploying any value creation playbook:

1. Where is the system structurally stuck?
2. Which value creation initiatives are shallow and which are existential?
3. What becomes possible if we act at the deepest point first?

The question I would leave with every GP, operating partner, and portfolio CEO reading this: Have you truly found the fulcrum before you set the first lever?

The math has changed. Getting the tools right is no longer enough. You have to get the point right.

Why this matters for LPs and GPs

For GPs

• Return generation now depends on depth, not just activity. Operational intensity without strategic sequencing risks value leakage.
• Leadership and strategy decisions are no longer deferrable. Higher growth requirements compress the timeline for tough calls.
• Value-creation credibility matters. LP scrutiny increasingly focuses on how returns are generated, not just whether they are.

For LPs

• Underwriting assumptions must evolve. Higher EBITDA growth targets increase execution risk - particularly if deep leverage points are ignored.
• Operational narratives require interrogation. Tool-heavy value creation plans may signal motion rather than momentum.
• Manager selection favours judgment over frameworks. The ability to identify and act on true fulcrum decisions is emerging as a key differentiator.

Closing thoughts:

As borrowing costs reset expectations across private markets, the firms that outperform will not be those with the most sophisticated playbooks - but those with the discipline to act at the deepest leverage points first.

This question will sit at the heart of many conversations across the SuperReturn community in the year ahead:

Have you truly found the fulcrum before you set the first lever?