72% of PE Firms Can't Defend Their KPIs at Exit. Commercial Readiness Is Why.
EY's 2026 Exit Readiness Study landed July 1 with a finding I keep coming back to: 72% of PE firms identify weak data and KPI reporting as their biggest finance gap at exit, and 41% lack the data granularity to substantiate their equity stories.
I've spent time inside this problem — not as a PE partner, but as someone who has watched founders scramble to reconstruct commercial history six weeks before a process launch. The data buyers want doesn't get built in six weeks. It gets built in quarters. And when it isn't there, the equity story you've been telling your LP base hits a wall the moment a sophisticated buyer runs their own cohort analysis.
The EY finding confirms what I've seen from the other side of that table: 88% of firms run some form of exit prep. The problem is that prep stops at quality-of-earnings and never reaches the commercial layer buyers actually stress-test.
The Gap Is GTM Instrumentation, Not Finance
EY is precise about where the breakdown occurs: 65% of firms cannot accurately reflect value-creation initiatives in reported EBITDA. That figure points directly at GTM. Pricing improvements, ICP tightening, retention programs — these are the initiatives operating partners drive during the hold. If they don't show up in reported numbers in a way buyers can verify, they don't show up in the multiple.
I want to be honest about the limits of that claim: the translation from GTM work to EBITDA is genuinely hard, and there is no clean formula. But the firms that do it credibly share one thing — they started instrumenting early enough that the data has history behind it.
Commercial diligence — customer health, revenue concentration, pricing durability, switching intent — is where acquirers now spend serious time. The EY study flags that most exit readiness work misses this layer entirely.
Poor Earnings Quality and Churn Are Deal Killers, Not Just Haircuts
Bain and StepStone's 2026 GP Survey names poor earnings quality and customer churn as the first and second diligence killers blocking deal closes outright — not just compressing price. That distinction matters. A valuation haircut is recoverable in negotiation. A broken process is a pulled LOI.
Operating partners who treat commercial health as a pre-exit sprint are building toward that outcome. The data buyers want takes quarters to construct credibly. It cannot be assembled in six weeks and survive scrutiny. I've seen it attempted. It doesn't hold.
The NRR-to-Multiple Relationship Is Real — With Caveats
Lever Partners has quantified a relationship between net revenue retention and exit multiple that is worth understanding, even if the specific numbers vary by deal: 113% NRR correlating to roughly 24x revenue multiple versus 98% NRR at roughly 5x. I'd treat those specific figures as directional, not precise — deal context, sector, and buyer type all move the numbers. But the direction is not in dispute. Revenue quality compounds into valuation in ways that are measurable.
For operating partners, that relationship reframes the hold-period investment thesis. GTM instrumentation — the systems that measure and improve NRR, ICP fit, and revenue quality — isn't overhead. It's the mechanism through which the work you're doing during the hold converts to exit multiple. Whether you use Andru or something else to build that instrumentation layer, the question isn't whether to invest in it. It's whether you can afford to run the hold period without it.
18,000+ Companies Past Typical Exit Windows
McKinsey's 2026 Global Private Markets Report puts 52% of PE buyout inventory past typical exit windows — more than 18,000 portfolio companies held beyond the point where financial engineering alone drives returns. That's not a niche problem.
In that environment, the operating partners who will defend their portfolios in LP reviews are the ones who have built comparable, board-legible commercial metrics across holdings — not the ones who can tell a good story about one company. Comparability across the portfolio is what makes the operating partner function defensible.
What This Means in Practice
Instrument before you need to. The commercial data buyers want — customer cohort health, NRR by segment, ICP concentration, pricing durability — needs at least two to three years of clean history to be credible. If you're not building it now, you're not building it in time.
Make GTM metrics comparable across holdings. A consistent measurement framework applied across the portfolio gives you the cross-company comparability that exit processes demand. One company's NRR means nothing without a portfolio baseline.
Separate value-creation narrative from EBITDA reporting. The 65% of firms that can't reflect GTM initiatives in reported EBITDA are failing at translation, not execution. You need a documented mechanism — measurable commercial milestones — that connects GTM work to financial outcomes in terms buyers can verify.
Run buyer-grade commercial diligence on yourself, continuously. The firms that compress time-to-close are the ones who aren't surprised by what buyers find. That requires treating commercial diligence readiness as a standing operating standard, not a pre-exit workstream.
I'll be direct about what I don't know: I can't tell you exactly which of these moves will matter most for your specific portfolio. That depends on sector, hold period, and buyer profile. What I can tell you is that the firms showing up to exit processes with clean commercial data are having different conversations than the ones who aren't.