The Race for Differentiation – How PE Firms Are Evolving In 2025

As PE firms navigate a shifting landscape, two strategies are emerging: consolidation and differentiation. With fundraising challenges persisting, firms that stand out with a clear strategy – and leadership edge – are best positioned to thrive. At the same time, the integration of AI is reshaping talent acquisition and operational strategies. Leo Cummings, an Associate at Hunt Scanlon Ventures, examines Bain & Company’s latest insights on how PE firms are securing a competitive edge.

Private equity is experiencing a shakeout, where scale and specialization are becoming defining factors for success. The industry is seeing capital consolidate among top firms, making it increasingly difficult for mid-sized and emerging managers to raise funds. 

Bain & Company’s Global Private Equity Report 2025 highlights that “capital will continue to consolidate in the hands of top performers and scale funds with the most fund-raising clout.” This shift underscores the need for firms to clearly articulate their value proposition to stand out in a crowded field.

The pressure to differentiate has never been higher. According to Bain, “If you can’t offer investors a differentiated value proposition, raising your next fund is going to be a serious challenge.” This means firms must go beyond traditional playbooks, focusing on sector expertise, operational value-add, and innovative investment strategies to maintain their fundraising momentum.

Leadership War

As firms compete for capital, they are also in a war for leadership talent to execute on their strategies. Hiring the right executives is a crucial piece of the puzzle, particularly in an environment where returns will be harder to generate. Bain’s report highlights that “Matching leadership to mission is foundational: The ability to solve talent issues like these quickly can often make or break a deal.” 

“Leadership selection is increasingly data-driven, with PE firms relying more on performance analytics and AI-powered assessments to match executives with the right roles.”

“This emphasizes the need for experienced professionals who can execute value-creation plans efficiently,” said Leo Cummings, an Associate with Hunt Scanlon Ventures. 

According to recruiters, PE firms must ensure they have executives capable of navigating high-interest-rate environments, shifting regulatory landscapes, and evolving technology adoption. Leadership selection, they say, is increasingly data-driven, with PE firms relying more on performance analytics and AI-powered assessments to match executives with the right roles. 

Bain notes that “…many carve-outs come with capable leaders who have grown up in a cozy, slow-moving corporate world. But PE-backed carve-outs are anything but cozy and slow-moving.” This highlights the need for transformational leadership that can thrive in fast-paced, results-driven environments.

Growing Role of AI in PE Talent Strategy

Artificial intelligence is reshaping private equity, not just in deal sourcing and portfolio optimization but in talent acquisition and leadership integration. 

Bain’s report points out that leading firms recognize that AI isn’t just a tool, it’s a competitive differentiator. The ability to harness AI for leadership assessment, operational efficiency, and data-driven decision-making is becoming a defining trait of high-performing firms.

In addition to traditional PE roles, firms are actively recruiting AI and tech specialists to future-proof their portfolios. According to Bain, “The firms having the most success mining value tend to share a similar outlook: They’ve become true believers in generative AI’s potential and are committed to managing decisively through this period of change.” 

Driving Alpha

Beyond leadership hiring, private equity firms are aggressively integrating AI and technology expertise across their portfolio companies. Bain reports that “the firms getting ahead of the game are making significant investments in capabilities, sharing what they’re learning, and helping portfolio companies stay focused by applying AI to strategic priorities.”

“…many carve-outs come with capable leaders who have grown up in a cozy, slow-moving corporate world. But PE-backed carve-outs are anything but cozy and slow-moving.”

This shift means that PE-backed companies are actively recruiting AI specialists, machine learning engineers, and data scientists at a higher rate than ever before. 

The goal is to leverage AI-driven insights to streamline operations, enhance customer experiences, and improve margin growth. Bain highlights that “portfolio companies are scoring early return on investments by using AI to enhance products, boost revenue, and expand margins via operational efficiencies.”

The impact of AI on portfolio company performance is becoming more measurable. Bain reports that Cengage, in which Apollo Global Management holds a minority stake in, noted a 22% increase in software development efficiency and a $5 million revenue lift in its first year of AI adoption. These early successes indicate that AI integration isn’t a luxury, it’s a necessity for firms aiming to drive alpha in a competitive landscape.

The PE firms that thrive in 2025 will be those that successfully execute on two parallel strategies: differentiating themselves in a consolidating market and embracing AI-driven leadership and operational models. Bain’s report is clear, “the surest way to land in the winner’s circle is to articulate your ambition clearly and develop a practical strategy for how you plan to compete in the years ahead.”

In this evolving environment, scale alone won’t be enough. “Firms must prove their ability to hire and integrate the right leaders, leverage AI for decision-making, and execute with precision,” said Mr. Cummings. Those that do will emerge as the dominant players in private equity’s next chapter.