Buyouts Now Need 12% Earnings Growth to Match Old Returns

What's New

Buyouts can no longer count on multiple expansion, so earnings growth has to more than double to deliver the returns of the last decade. Emilio Domingo, Partner and Chief Commercial Officer for Bain & Company's EMEA Private Equity practice, argues this in a conversation with Ross Butler on Fund Shack. Bain's deal data shows margins barely moved across a decade of exits. Returns came from revenue growth and rising multiples. LPs should test each GP's value creation plan for the operating gains it needs without help from multiples.

Why It Matters

The common reading of Bain's 2026 report is a recovery, with deal and exit values up in every region. Domingo's numbers point to a harder operating test for the average fund. Generalist managers without sector depth or sourcing scale face the most pressure. GP selection matters more as top and bottom quartiles pull apart. Bain sells diligence and value creation work, and a margin-led return model raises demand for both.

By The Numbers

• 12%: Annual EBITDA growth an average buyout now needs to return 2.5x gross. From 2013 to 2023, about 5% did the job.

• 50%: Share of value creation from revenue growth across close to 1,000 exited deals. Multiple expansion supplied the other half.

• 15%: The average EBITDA margin at entry. Companies exit at the same 15% on average.

• 6%: The global drop in deal count in 2025, even as headline deal values rose.

Memorable Quotes

• "It's a leaky bucket, margin expansion." Price erosion, inflation, and supply chain shocks drain gains as fast as operators create them.

• "What really differentiates the winners and the losers in the private equity world today is that ability to leverage scale where scale matters." His answer to the higher bar: sector depth and sourcing scale.

• "Margin expansion however has been very very limited on average, contributing almost nothing to the overall industry value creation." An admission that a decade of operational focus left margins flat.

• "That number today, if you start an average buyout, that's 12. So it's two and a half times as hard." The thesis in two sentences.

The Wrap

Domingo's case stands while multiples stay flat and margin gains stay hard to bank. It weakens if lower rates bring back multiple expansion, since that lever supplied half of past value creation. It also weakens if AI helps average portfolio companies lift margins at scale. The liquidity backlog he flags will apply pressure first. Exit pricing on deals sold over the next 2 to 3 years will show whether 12 holds as the new 5.