Why PE deals now need 12% EBITDA growth, and where it comes from
Bain says deals now need 10% to 12% annual EBITDA growth to earn what 5% used to. With debt expensive and holds long, operations carry the return.
Private equity returns now depend on operating work more than at any point in the last decade. Bain's shorthand is "12 is the new 5." In the 2010s, about 5% annual EBITDA growth could deliver a 2.5x multiple over five years. Today a deal needs roughly 10% to 12% a year to get the same result.
Why did the math change?
Debt does less. Bain points to lower debt levels and borrowing costs of 8% to 9%, so financial engineering adds less to returns than it used to. Multiple expansion can't be counted on either. That leaves revenue growth and margin, and both take operating work.
Holds are longer too. Penn Mutual Asset Management, citing PitchBook and Bain, reports 33,575 PE-owned companies awaiting exit at June 30, 2026, and buyout holding periods at exit of about seven years, against five to six from 2010 to 2021. A longer hold means more years in which the plan has to keep producing.
Where does 10% to 12% come from?
Rarely from one lever. A realistic plan combines revenue execution with cost work that shows up in the P&L within a year.
On the cost side, third-party spend is usually the fastest to move: software and cloud, agencies and media, and the vendors each add-on brought with it. The company controls those contracts, they renew on a schedule, and a buyer can verify the savings if the baseline is written down. We set out the case in PE's next EBITDA lever is the vendor stack.
On the revenue side, the gains are often in execution rather than strategy: pipeline discipline, pricing rules people follow, and sales and marketing tools that are paid for but not used. See revenue is stalling, and it's probably not a sales problem.
What should operating partners ask for now?
- Third-party spend by vendor, for each portfolio company, refreshed every quarter.
- A renewal calendar covering every contract above a set value, twelve months ahead.
- A baseline for every saving claimed, agreed with the company CFO, so it holds up in diligence.
For companies already late in the hold, we wrote about where the margin is in years five to seven.
Where to start
Pick one portfolio company where the vendor base hasn't been reviewed since the deal closed. A Hold-Period Margin Sprint works through it with a baseline the CFO signs off. To run the same discipline across the portfolio, see the Portfolio Vendor Desk and our work for investors.
Sources: PE Insights, Bain: global buyout deal value surges as 12 is the new 5, 2026, Penn Mutual Asset Management, Private equity's unsold backlog keeps growing, October 2026.
What does Bain mean by 12 is the new 5?
Deals that once needed about 5% annual EBITDA growth to reach a 2.5x return over five years now need roughly 10% to 12% a year, because debt and multiple expansion contribute less.
How long are private equity holding periods now?
Bain puts buyout holding periods at exit at about seven years, against five to six years from 2010 to 2021.
What is the fastest operating lever in a PE hold?
Third-party spend is often the fastest: software, cloud, agencies, media and vendors renew on a schedule and the savings can be verified against a baseline.
Practical notes on agencies, media, software and vendor cost.
One useful piece at a time, no fluff. Free on Substack, unsubscribe any time.
SubscribeWe would rather look at your numbers than talk about ours. Tell us the stage of the deal and we will tell you within a day whether the vendor base is worth a look.