From Value Creation Plan to Treasury Creation Plan
For fifteen years, private equity (“PE”) has organised value creation around the Value Creation Plan (“VCP”). This detailed plan is drawn up at acquisition, identifies the value levers on the top line and bottom line of the newly acquired business, and serves as the management team’s roadmap for the whole holding period. Its job is to align the deal team, the operating team and management on what needs to happen and when.
I don’t question its usefulness. I question whether it is enough. Investors and management also need to align on a document of similar weight, the Treasury Creation Plan (“TCP”), which they should build together before handing it to the portfolio company’s CFO.
To see why, let’s start with what has changed.
1. Three pressures are straining the PE model
1. Valuation multiples are falling
They sit around 24% below the mid-2021 peak, when the European mid-market was valued at 11.6x EBITDA, and the Argos Index puts the multiple at 8.8x in Q2 2026. Financial sponsors are paying a median 10.2x, a partial recovery from the 8.3x low of Q4 2025, an annus horribilis.
2. Debt is expensive
SONIA stood at 3.73% on 23 October 2026. On 17 September the Bank of England held Bank Rate at 3.75%, with three of the nine MPC members voting for a rise to 4% and CPI at 3.1% (MoneySavingExpert, September 2026). In the UK, debt funds provided 68% of sponsor-backed mid-market financings in Q2 2026, up from 49% in Q1, and Houlihan Lokey puts the all-in yield on European private performing credit at 9.73% (Houlihan Lokey MidCapMonitor Q2 2026, via Kadenwood). The impact is twofold: before closing, a fund can borrow less than it could five years ago, and after closing, every rate rise shows up as a year-end finance charge and a risk of breaching covenants.
3. Liquidity has tightened
Bain puts the average holding period at around seven years, against five or six between 2010 and 2021. Globally, the industry holds 32,000 unsold companies worth $3.8 trillion, and distributions to LPs have stayed below 15% of NAV for four years (14% in 2025, a level not seen since 2008-09). Continuation vehicles help, but they still account for less than 10% of total exit value.
In the UK specifically, PE deal volume fell 3.4% year on year in H1 2026, and the 96 completed exits were nearly 30% fewer than a year earlier, while exit value doubled to £23.4bn (KPMG UK Private Equity Snapshot H1 2026). The UK remains Europe’s largest PE market by deal value, and roughly one deal in three involves a US sponsor (Shoosmiths, using PitchBook data, July 2026). The UK exit window is open, but it is open for well-documented assets. For a CFO in an LBO, the real question is whether the business will be able to prove what it is worth when a buyer comes along.
2. Some sectors are suffering more than others
On top of the financial pressures come three shocks that hit portfolio companies’ P&L directly, and very unevenly from one sector to another.
Food, where persistent inflation across Western economies (UK CPI reached 3.1% in August 2026) squeezes the margin of any consumer model that cannot pass price rises on to the end customer, or whose customers are trading down to essentials.
Energy. Brent traded at around $115 a barrel on 20 October 2026, after topping $126 mid-month, against an average of $84 in July. For energy-intensive industry and for logistics the equation changes, and for any business that buys transport the hit to EBITDA margin is direct.
Tariffs, which penalise any cross-border model, and US exposure in particular.
3. The classic PE value levers, revisited
Back to fundamentals: how relevant are PE’s three traditional value levers in this environment?
Multiple expansion. With multiples 24% below the 2021 peak and financial buyers back above 10x, no team can build its investment case on the hope of selling for more than it paid. It is not a lever: at best it is a managed risk.
EBITDA growth is the main lever because of its multiplier effect, but there is no magic formula: revenue growth (organic and acquisitive) and better operating performance, meaning margin.
On revenue growth, in both cases the CFO must give the CEO and the board a long-term projection of cash on hand. I mean planning that covers the full horizon of the plan, on top of the short-term 13-week cash flow forecast. The question arises when funding an acquisition, opening a marketing budget in a B2C model or hiring a sales team to improve commercial effectiveness. Being able to project these figures reliably reassures investors and management about their capacity to invest (how much and when).
Deleveraging has less impact, admittedly, but it is no longer optional. As the operating partner of a global fund (EU/US) told me recently:
“Today, everything has to be optimised!”
Take an example I use often: a portfolio company with £80m of revenue and debt at 8.5%.
Indicator | Calculation | Result |
|---|---|---|
Average daily revenue | £80m ÷ 365 | £220k |
Cash released by cutting DSO by 10 days | £220k × 10 | £2.2m |
Interest saved per year if that cash repays debt | £2.2m × 8.5% | ~£190k |
Cutting DSO (days sales outstanding) by 10 days reduces net debt by £2.2m, which saves the business around £190k of interest a year. That is a fairly conservative assumption in the UK, where average payment terms have lengthened to 57 days and payments arrive 34 days late on average (Coface UK Payment Survey, September 2026). With EBITDA and multiple unchanged, the full amount flows through to the fund’s Equity Value at exit.
The same reasoning applies to supplier payments, inventory and cash held in subsidiaries. This example is exactly what a VCP does not cover, which is why a TCP needs to be built alongside it.
4. Six tips for a strong TCP
1. A single view of the whole group
This is decisive, especially when M&A plays a big part. The value creation plan may include acquisitions outside the home market or vertical acquisitions, meaning companies that operate at another stage of the value chain. In both cases, migrating the acquired business onto the group’s legacy ERP is rarely realistic, so several ERPs will coexist with scattered operational data (customer and supplier data at the very least). One answer is an agnostic layer that connects to all of them and consolidates the entire group, because no ideal ERP covers every country and every business line.
2. Consolidation of all cash flows, financing included
Operating cash flows sit in the ERP (see the previous point). Financing flows, by contrast, are often scattered across the organisation and rarely consolidated in one tool: repayment schedules in Excel, hedging contracts in PDF, factoring terms held by the sales teams, and so on. Bringing them together puts the repayment schedule of every debt line, interest rate and FX hedging derivatives, factoring and investment products in one place. The CFO gains twice: they know their cash on hand and net debt at all times, and principal and interest flows sit in a maturity schedule that updates as market conditions move.
3. DSO optimisation
This is without doubt the most effective lever, and it requires two things: an invoicing process for every customer that leaves no room for dispute, and systematic, automated reminders at every level of the business, handled by sales, sales administration and finance. Adding multichannel follow-up (email and phone) is also very effective.
4. Consolidation of purchase requisitions
As a group grows, especially through acquisitions, purchase requisitions become fragmented across entities and nobody has a consolidated view of them. The CFO needs that view to control external spend in line with the VCP, and to make sure invoices are paid on time, for the right amounts and from bank accounts with enough funds to avoid overdraft interest and other bank charges.
5. Long-term cash flow planning
I mentioned it earlier, but funds ask for it constantly, and it is almost always done in Excel models. For a former financial analyst or consultant, building the model is fairly natural and simple, while the real complexity lies in maintaining it over time. Each time the fund asks, you have to start from the correct cash position (gathering every bank balance), add the expected short-term receipts and payments (which the CFO probably cannot see from head office) and only then project the famous P&L to cash. In the end, as a fund, and without questioning the CFO’s abilities, you have no certainty that the figures are comparable from one close to the next, or that the input data are accurate and complete.
6. Reporting to the fund
When every flow is captured in a single system and categorised consistently (with AI supporting the categorisation), the CFO gets a single database that guarantees the integrity of the treasury financial information they report. The effect on the relationship with the fund is immediate and, in my experience, underestimated: no more questions about how the figures were produced, no more questions about comparability between closes, and no more delay while the CFO pulls the information together.
5. What I ask of funds
Work with the management team of the newly acquired business on a Treasury Creation Plan, alongside the Value Creation Plan and with the same level of rigour. For the same economic performance, it is what will maximise value creation for management, for the GP and for the LPs.
