Insights
Private equity firms typically focus on cost programs, operational efficiency, and buy-and-build strategies to increase value.
One lever often remains underutilized: pricing.
Pricing is one of the fastest, capital-light, and most sustainable EBITDA levers in a portfolio.
Why Pricing is Particularly Attractive for PE
From an investor’s perspective, pricing meets key value-creation criteria:
- Quick impact (often within a few months)
- Little or no CapEx required
- Direct EBITDA effect
- Positive impact on multiples and equity story
Even a 1–2% improvement in realized price levels can—depending on cost structure—have a disproportionately positive effect on results.
The Typical Picture in the Portfolio
In many portfolio companies, a similar pattern emerges:
- Historically grown price lists
- High discount variance
- Pricing decisions are effectively made by sales
- Low transparency on realized prices and margins
Internally, pricing is considered sensitive; externally, hard to control—yet the economic leverage is obvious.
What a Pricing Project Must Deliver in the PE Context
An effective pricing project is not a theoretical repricing; it is an intervention in the company’s commercial management logic.
Focus areas include:
- Transparency on actual prices and margins
- Clear price and discount logic
- Differentiation by customer, service, and contract
- Defined decision rights and governance
The goal is not the “right price” but the management team’s ability to systematically manage and enforce pricing.
Three Concrete Benefits for Private Equity
- Quick EBITDA Lever
Pricing directly impacts contribution margin—without structural interventions or investments.
Especially in early holding phases, it creates financial leeway for further initiatives. - Professionalization of Management
Pricing projects enforce clear decisions:
Who sets prices? Who approves exceptions? Which customers are truly profitable?
This enhances management’s leadership and control capabilities. - Stronger Equity Story for Exit
Companies with:
- Stable realized prices
- Clear pricing governance
- Transparent price logic
…are easier to value for buyers and carry lower risk.
Pricing thus becomes part of exit readiness.
Typical Mistakes from a PE Perspective
In practice, pricing often fails due to:
- Starting too late in the investment cycle
- Purely analytical projects without enforcement
- Lack of management and sales involvement
- One-off measures without sustainable governance
Pricing is not a one-off—it is a permanent management lever.
Conclusion
For private equity firms, pricing is not just an operational detail but a central value-creation lever.
It delivers:
- Quick EBITDA impact
- Better controllability within the portfolio
- A stronger equity story for exit
In short:
Firms that do not actively manage pricing in their portfolio leave value on the table.
