Working Capital’s Next Chapter for Private Equity

Faster Results, Sustainable Cash Performance and Smarter Technology

Working capital optimization delivered one of the strongest performance profiles in FTI Consulting’s 2026 Value Creation Index.¹ More than half of surveyed private equity firms (52%) said their working capital initiatives exceeded their original business case, outperforming every other value creation lever measured in the study.

With financing costs elevated and hold periods extending, liquidity has become a strategic priority. Historically, working capital has been one of private equity’s most efficient levers for unlocking cash, generating capital that can be redeployed into broader value creation initiatives across the business.

For firms that get it right, the value doesn’t stop with the initial business case. Improvements across receivables, payables and inventory can continue to compound over time.

Working Capital Delivers Both Speed and Outperformance

Graphic showing value creation results: 52% exceeded business case, 55% realized value in 6 months, and 82% within 12 months.

Working capital is also producing results faster than any other lever measured in this year’s survey.

Working capital is also producing results faster than any other lever measured in this year’s survey. More than half of respondents (55%) reported realizing measurable value within six months, while 82% achieved results within twelve months — well above the survey average of 63%. Working capital also recorded the largest year-over-year improvement in time-to-value, increasing by 35% compared with last year’s survey. This mirrors what we see in practice, where targeted working capital initiatives can begin generating cash impact in as early as four weeks.²

For operating partners, that speed can create meaningful flexibility, whether supporting investment priorities, reducing financing pressure or strengthening the balance sheet ahead of an eventual exit. Yet the study suggests a disconnect: while working capital consistently delivers results, it receives relatively little strategic attention.

Beyond the Initial Cash Release

Despite leading the index on both performance and speed to value, respondents ranked working capital last among all nine value creation levers when asked to prioritize initiatives for 2026.

One explanation may lie in how organizations approach working capital. Most naturally develop around growth objectives or cost optimization, while relatively few build an enduring focus on cash performance. A “cash mindset” rarely develops without deliberate attention.

That distinction between unlocking cash and managing cash as an ongoing strategic priority matters, and it’s where firms often leave value on the table. Working capital initiatives typically begin with targeted efforts to improve receivables, inventory or payables performance, generating a meaningful near-term liquidity boost. But the real upside comes from what happens next: embedding the governance, performance metrics and accountability structures that turn a one-time improvement into a sustained competitive advantage throughout the investment lifecycle.

For private equity firms, the objective is building an operating model where cash performance is embedded into how the business runs, creating a track record of liquidity discipline that strengthens the story at exit and signals to buyers that the gains are structural rather than a one-time squeeze.

AI Adoption Remains Limited, but the Opportunity is Growing

Building a sustainable cash culture increasingly depends on better information, faster decisions and greater operational discipline, making AI a critical enabler. One of the more surprising findings from this year’s survey is that working capital remains the least AI-enabled value creation lever. Just 5% of respondents identified the technology as the primary driver of improved effectiveness in working capital optimization. This is the lowest of all nine levers, compared with 18% for pricing optimization and 15% for cost structure optimization.

The low AI-effectiveness score for working capital highlights a meaningful value creation opportunity. In practice, AI is already improving some of the most time-intensive aspects of the cash conversion cycle: correlating payment history with AR aging to sharpen payment forecasts, surfacing early warning indicators for at-risk customers before issues escalate and accelerating the data cleanup that enables faster, more targeted collections. In practice, we are seeing AI-enabled accelerators quantify a company’s working capital improvement potential in as little as 24–48 hours, turning what was once a lengthy diagnostic into a fast, data-driven starting point.

The technology is already proven. The opportunity for PE firms is to scale these capabilities across portfolio companies, unlocking cash faster, improving liquidity and strengthening a lever that has historically relied on manual effort.

Looking Ahead

Working capital has often been viewed as a tactical exercise to release cash. The findings suggest it deserves a larger role in the value creation agenda. As hold periods lengthen and capital becomes more expensive, firms that institutionalize cash discipline, not just periodic cash initiatives, can create a more resilient operating model and a stronger liquidity story across the investment lifecycle.

As working capital evolves, the focus is shifting toward the operating discipline, data capabilities and technology needed to make cash generation faster, more predictable and more durable across the investment lifecycle. Rather than searching for entirely new sources of value, firms may be better served by maximizing one that has already proven its ability to deliver quickly and compound over time.

These findings are drawn from FTI Consulting’s 2026 Value Creation Index, a global survey of 555 senior private equity decision-makers examining how nine operational levers and two enablers — including AI — are driving value across the deal lifecycle. For the complete data set and analysis across all nine levers, read the full 2026 Value Creation Index.

Footnotes:

1: All survey statistics provided in this article are based on the FTI Consulting report, “Private Equity Value Creation Index 2026: The Value Creation Edge.” See FTI Consulting, “Private Equity Value Creation Index 2026: The Value Creation Edge” (2026).

2: FTI Consulting, “Working Capital Catalyst: Accelerating Cash Flow, Sustaining Efficiency” (Nov. 27, 2025).