Diligence the Operating Model, Not Just the Server Room
Bain's 2026 report says returns now depend on EBITDA growth at the portfolio company — full stop. The diligence that finds it covers the processes, the cost structure, and the workforce, together with the systems.
Andrew S. Collier · Founder & Managing Principal, Collier & Associates · October 2, 2026
Bain & Company's Global Private Equity Report 2026 counts 32,000 unsold portfolio companies worth $3.8 trillion. The average holding period at exit is hovering around seven years, up from five to six through 2010–2021; almost 40% of companies are now held more than five years, against 29% in 2019. Bain's analysis of fifteen years of buyout vintages shows IRR starting to stagnate around year seven. Almost 80% of the GPs Bain surveyed expect multiples to stay flat in 2026. And the two most common hurdles to closing deals in 2025 were inflated seller expectations and diligence red flags — poor earnings quality, customer churn.
Bain's conclusion is blunt: performance will rely on a firm's ability to rapidly generate strong EBITDA growth at its portfolio companies — full stop. If the multiple isn't moving and the hold is seven years, the value is inside the company. The diligence has to find it before close, not discover it in year three.
Bain & Company, Global Private Equity Report 2026 — the hold is longer and the multiple isn't moving
What a technology diligence usually misses
The standard IT checklist — infrastructure, licensing, security posture, key-person risk, disaster recovery — is necessary. I run it. But the operating model runs through the systems, and a checklist doesn't price it. The questions that decide the 100-day plan are different: what does the target actually run on, process by process; what does each core process cost at the task level; how much of that cost sits in rework, workarounds, and reconciliation; which roles are overloaded and which essential roles are uncovered; and does the system of record produce auditable costs. Four lenses, one diligence.
Core processes, SG&A cost structure, workforce and capacity, systems and data — the four lenses of an operations-and-technology diligence
Three from the record
When Universal Compression ($950 million) and Hanover Compressor ($385 million) merged into Exterran, I had two months to assess quote-to-cash and product lifecycle management across the Oracle E-Business Suite environment with a 20-plus-person matrix team. The model found engineers creating redundant part numbers with no naming standards, designers building bills of material by hand, purchasing keying POs from MRP reports, WIP jobs held open six to eight weeks after completion leaking cost, dual manual time entry, and month-end reports assembled by hand. About $2 million in annualized non-value-added task cost; a lean future state for both processes; product family and naming architecture; item master, BOM, and routing governance standards — approved for global rollout. The Senior Director of Compression Manufacturing wrote that the work showed not only what to improve post-merger but "how well the company's Oracle E*Business ERP software had been implemented to support the business."
PBM Nutritionals, a $450 million FDA-regulated infant-formula manufacturer, was preparing for sale. Seven core processes across SAP, PLM, and LIMS under cGMP and CFR Title 21, a 20-person client matrix team, and a 9% headcount target to validate without harming operations. The findings: $2.8 million in cost reductions, 18.9% of OpEx; 59% of process work non-value-added or necessary-but-non-value-added; 43% of overall cost consumed by systems outside the sanctioned blueprint; the 9% achievable without operational impact — and essential Parts Store and QA roles uncovered on nights and weekends, causing line downtime. Capacity misallocated in both directions, which is exactly what a buyer should know.
A PE sponsor contracted me directly for a pre-acquisition IT diligence of a steel stamping manufacturer with three plants whose operations ran on a basic fabrication ERP heavily extended by a bespoke system designed, built, and operated by a three-person outside firm on a $400,000-a-year fixed fee. Two weeks of fieldwork: two site visits, a live supervisor training session, a technology-stack and SDLC review, an infrastructure call. The pros were real — automated order-to-shipping and procure-to-pay, top-tier RFID and barcoding, proven replication at a second plant; revenue growth from roughly $7.5 million in 2007 to $48 million by 2013 was genuinely system-enabled. The cons were material: a two-developer key-person dependency, a non-configurable architecture where every process tweak required code, no forecasting or capacity planning, no product costing or manufacturing accounting — roughly 100 hours a year of manual finance work and no auditable historical costs — and non-redundant core infrastructure with no DR plan. One plant was embracing the system and scaling; the other was circumventing it. My recommendation: no acquisition without an in-depth forensic accounting audit of historical manufacturing and product costs.
Exterran (2007), PBM Nutritionals (2009), and a PE sponsor's pre-acquisition IT diligence (2014) — the technology finding and the operating-model finding were the same finding
Diligence that becomes the plan
Bain's prescription for a stalled thesis is to re-underwrite the deal and refresh the value-creation plan. A task-level dataset from diligence is how you re-underwrite: it is the baseline the 100-day plan and the 36-month roadmap are measured against, and it is already graded — released capacity, realized cost-out, avoided cost — with owners and costs to achieve.
That is the reporting discipline I carry from six-plus years of buy-side and sell-side PE M&A transactions, and it is what a sponsor should expect from any diligence that claims to cover operations.
Where to go from here
If the multiple isn't moving, the value is inside the company, and the diligence has to find it before close. If this looks like your situation, PE & M&A Operations & Technology Advisory is built for exactly this — buy-side and sell-side diligence that prices core processes, SG&A, workforce, and systems at the task level and hands the sponsor its 100-day baseline.
Direct: 502-317-8900 · andy@andrew-collier.com · andrew-collier.com · linkedin.com/in/andrewscollier
Andrew S. Collier · Founder & Managing Principal, Collier & Associates · Greater Louisville, KY
Creator of BAS™, the task-level cost, capacity, and value model behind the BAS™ Value Creation Sprint. 40 years in enterprise transformation; 100+ enterprise systems engagements; 40+ business transformations; 29 JD Edwards implementations; six interim CIO, CTO, and IT Director roles; 6+ years of PE M&A transactions as advisor to PwC, Deloitte, and Crosslake Technologies.
Sources: Bain & Company, Global Private Equity Report 2026 (February 2026); Collier & Associates engagement record (Exterran, 2007; PBM Nutritionals, 2009; PE sponsor pre-acquisition IT diligence, 2014).
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