The New AI Playbook for Private Equity

Artificial intelligence is beginning to reshape the environment in which private equity firms operate. It is changing how companies compete, how quickly advantages emerge or disappear, and how value can be created during the hold period. For firms whose investment frameworks were built in a pre-AI environment, this shift introduces both new opportunities and new uncertainty.

In this paper, Dr. Benjamin Herndon and Ben Szuhaj outline a practical framework for navigating that shift. It begins with two core questions: How exposed is an industry to AI-driven disruption, and does a specific company have the assets required to build a defensible AI advantage? Evaluating disruption potential and differentiation potential together helps firms determine when AI is peripheral to an investment thesis and when it should become central to it.

For most portfolio companies, the most immediate opportunity lies in what the authors call the AI-enabled EBITDA bridge: a coordinated set of AI initiatives that improve operational efficiency, decision-making, and customer experience. Individually these efforts may appear incremental. Together, they can meaningfully shift a company’s earnings trajectory within the hold period.

For a smaller subset of companies sitting at the intersection of high disruption and high differentiation, the opportunity is larger. The authors introduce the concept of the AI multiplier: the premium the market places on a company whose AI capabilities are not just improving operations but reshaping its competitive position. This is where AI moves beyond the EBITDA bridge and into the investment thesis itself, with implications for how firms source deals, size investments, and tell the story at exit.

AI will not replace traditional value creation playbooks, but, increasingly, it will shape them. Firms that approach AI as a disciplined strategic capability rather than a technology trend will be best positioned to create durable value across their portfolios.

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