Private equity (PE) is no longer just about buying well—it is about transforming assets using a differentiated value creation thesis. As AI, geopolitical uncertainty, and operational complexity reshape the industry, competitive advantage is increasingly likely to come from scale, specialization, and execution.
In this excerpt from the interview, Vervisch reflects on the firm’s work with McKinsey.
In this interview, McKinsey Senior Partner Kim Baroudy and McKinsey Partner Sunil Kishore speak with Karim Tabet, senior managing director and head of Europe, and Michaël Vervisch, managing director, at Providence Equity Partners on how the firm’s investment strategy—and the PE industry more broadly—is adapting to this new reality (see sidebar, “A continuous conversation about structure and incentives”).
The following is an edited transcript of the conversation.
Kim Baroudy: McKinsey’s 2026 Global Private Markets Report discusses how the global PE industry has entered a mature and technically demanding phase. How are European PE players navigating these changing times?
Karim Tabet: I have been doing this for more than 25 years, and it has never been easy. The market is competitive, and there are many PE firms today. To create value, you have to bring something differentiated. It is not just about buying cheap but about identifying unique businesses that you can quickly fix, turn around, and flip.
We believe that specialization is a key value creation tool. It enables us to spot trends early and decide which companies we want to invest in and develop a differentiated value creation thesis using our experience and network. Hopefully, if you do that right, you make better deals.
Sunil Kishore: With a portfolio spanning both Europe and North America, you are operating in an increasingly complex geopolitical environment. How has that changed the way you think about investing and creating value in your portfolio companies?
Karim Tabet: As a firm that does about half of its investments in Europe and the other half in the United States, we are observing a shift in some investors’ regional preferences.
The US has higher growth rates over the long term compared with Europe. Over the last couple of years, however, some investors have realized that they are overexposed to the region. And given that the US is much less predictable than it used to be, investors are now looking at developing a more balanced portfolio.
A fundamental difference between the US and Europe, which could impact large cap firms, is the depth of the public markets as an exit route for PE investors. In the US, an IPO is considered an acceptable exit, but PE IPOs are very rare and difficult in Europe. Since our firm operates in the middle market [segment], IPOs are usually not considered as a potential exit route, and the market opportunity to sell our assets to large-cap investors is as deep in Europe as it is in the US.
Sunil Kishore: Are there sectors or value creation priorities in Europe that you’re particularly excited about?
Karim Tabet: One of the attractions of Europe for us is that these markets remain highly fragmented. That often creates an opportunity to take a national champion and turn it into a European champion, principally through M&A. It’s not easy to do because there are many barriers, but if you’re focused and have the right tool kit—this is where sector expertise really matters—a lot can be done.
Kim Baroudy: Providence has built a large, diversified portfolio over the years. What are the biggest transformation priorities you’re focused on today?
Michaël Vervisch: We have dozens of companies across North America and Europe in sector-focused funds, and the value creation playbook has not fundamentally changed. Clearly, there are nuances that are different from a couple of years ago, but in practice, we have always looked for businesses that can be transformed within our sectors—whether as a result of fundamental changes in customer demand, technological evolution, or other market shifts.
In practice, that means finding the right talent to lead—and eventually support—the transformation at the board level, the management level, and more broadly across customer and other key relationships. It also means ensuring that companies have access to the right technology and understanding of their own data, as well as the capabilities needed to drive that transformation.
What has changed over the past 12 to 24 months is the pace of transformation, largely as a result of AI and other technological advances. That is where we are placing even greater emphasis: making sure our companies stay ahead and take full advantage of the technologies available to them.
The PE industry can longer rely on leverage and multiple expansion alone. The focus has shifted to transforming businesses, growing them profitably, and creating value through operational improvement.
Sunil Kishore: Software has been one of the defining investment themes in PE in recent decades. As AI reshapes the sector, how is Providence Equity thinking about sector exposure?
Karim Tabet: Our firm focuses on three pillars: experiences, learning or education, and connectivity.
We believe AI may actually reinforce the value of live experiences. As more content becomes digitally generated, consumers will increasingly place a premium on experiences that are authentically live, whether in music, sports, or theatre.
While parts of the education sector—particularly technology-focused education—will be affected by AI, much of education remains face to face. Anyone whose children experienced remote learning during COVID-19 understands that education is about far more than delivering content. It is also about the broader educational experience that students receive in schools.
Lastly, we think of connectivity as the “picks and shovels” of the AI economy. Without strong connectivity, you cannot fully enable AI.
Kim Baroudy: You’ve described sectors that may appear relatively immune to AI disruption—or even be strengthened by it. How are you thinking about leveraging AI as an accelerator of value creation across those businesses?
Karim Tabet: No asset is completely immune to AI; it will transform virtually every business, whether positively or negatively. It’s still too early to say exactly how that transformation will play out, but there are two main areas where we see transformation from AI.
The first is software development, which has been at the center of the broader discussion around AI and software. The second is customer service. Across many of our portfolio companies—from telecommunications operators to other customer-facing businesses—AI is fundamentally changing how customer service is delivered. Whether through voice agents, chatbots, or tools that help employees sift through information and better understand customer needs, AI is improving both efficiency and the customer experience.
Sunil Kishore: McKinsey research suggests that PE is moving toward greater specialization on the one hand and greater consolidation on the other. Looking five to ten years ahead, how do you see the industry evolving?
Karim Tabet: It’s pretty clear that there is consolidation in the industry, and that the largest asset managers are becoming even bigger. There are several reasons for this. Fundraising has become more complex, and scale allows firms to offer a broader range of products to the limited partners. It also enables them to pool greater operational resources and capabilities across their investments.
But as is often the case in people-based businesses, specialization matters, and it will be much harder for the larger players to differentiate what they offer—whether through sector expertise or the ability to generate superior returns. We have seen this, for instance, in the banking sector where you have a lot of behemoths but also a lot of boutiques that are striving. I see private equity evolving in a similar way, with a handful of “supermarkets” with scale alongside a group of niche or specialist “artisans” that will hopefully deliver higher returns.
Kim Baroudy: This is a particularly challenging time to lead. What keeps you up at night as a leader?
Michaël Vervisch: I think there are a couple of things that are constantly on my mind when I think about the companies we invest in.
The first is talent. Do we have the right people to execute what we want to achieve? Do we have the right management team? Are the companies we invest in set up to attract and retain the best people? And is that talent suited to the challenges at hand? In the past, you could have a successful CEO for ten or 15 years, and that was often a predictor of future success. With all the changes we’re seeing today—whether macroeconomic or technological—that is no longer the case.
The second is AI and broader technological change. Are we really leveraging these technologies? What opportunities are we missing? Clearly there are risks, but in many ways the biggest risk is not leveraging the technology and allowing new entrants or competitors to move faster and take market share.
The third is that the world is much less predictable than it used to be. There is much greater complexity around currencies, commodities, and political risk. The question is no longer how we predict these developments, but how we adapt when the unexpected happens.
Sunil Kishore: Looking back over Providence Equity’s collaboration with McKinsey, where do you think it has had the greatest impact? Were there particular challenges that would have been difficult to address through a traditional consulting engagement?
Michaël Vervisch: One valuable aspect [of our work with McKinsey] has been the alignment of incentives between our firm and McKinsey. Early in the collaboration, for example, we realized that execution of our product road map was becoming a bottleneck. McKinsey quickly identified the issue and brought together capabilities from across the firm that I hadn’t previously been exposed to. QuantumBlack, AI by McKinsey, for example, came in and accelerated the road map by at least three to six months. That was eye-opening—not only because it accelerated the product road map in the short term, but because our engineers worked closely with the team, saw what was possible, and raised the bar for the entire organization.
A second unique element was helping us bring greater structure to a founder-led business with deep technical expertise and a strong engineering bench. Having McKinsey teams working alongside the company on a day-to-day basis showed what good structure looks like and significantly accelerated that transformation.
Finally, we have been able to benefit from the broader relationships and perspectives that McKinsey has given us access to. We already hold significant sector expertise and visibility. Combined with McKinsey’s relationships across industries, geographies, and clients, that created opportunities and perspectives we would probably have discovered over time—but the collaboration accelerated them because the team had the time to explore them in depth rather than over the course of a typical three- or four-week engagement.
