During the ZIRP era, many private equity partners in our network focused entirely on Financial Engineering: ⤵️
1. ZIRP enabled PEs to finance acquisitions with 60–80% debt at sub-4% rates, expanding IRRs via leverage rather than organic growth
2. Cheap M&A expansion – buying at 8-10x EBITDA, adding smaller assets at 4-6x, exits at 10-12x with roll-ups and scale optics
3. Debt-funded dividends for early capital kickback, reducing risks and decreasing return periods
4. EBITDA engineering with add-backs, cost reclassification, adjusted EBITDA synergy segmentations to optimize for multiples
5. Refinancing arbitrage (interests up to 2.4% in 2019 moving gradually to 0% until the 2023 high jump) – timing right lowers WACC and generating incremental cash
6. Trimming the hold period down from 6-8 years earlier to 3-6 years now (5 on average), decreasing return periods and making for a more lucrative investment vehicle
Since ZIRP hasn’t been on the table since 2022, the past couple of years have seen a focused shift toward more traditional value creation and governance initiatives, closer to optimizing actual business performance.
This is a great period, because financial engineering alone does not deliver value for customers, and many funds executed PMI poorly, with businesses generating poor outcome and degrading over time. With value creation, PEs focus on increasing efficiency and providing additional opportunities within businesses to grow in value, brand, trust, and retention.
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Value Creation Is a Hard Requirement In 2026
Mario Peshev
