By Chandranath Chakraborty, Founder & Managing Partner · [email protected]
An acquirer will give full credit to savings it can trace into the accounts and challenge the rest. In the £24 million example below, the part that could not be traced reduced enterprise value by about £82 million.
Bain's 2026 Private Equity Midyear Report puts the change in simple terms. A deal that once needed about 5% annual EBITDA growth to reach 2.5x now needs closer to 10–12%, because purchase prices and financing costs are both high. That makes operational earnings growth more important, and it makes the evidence behind reported savings more valuable at exit.
For Asian sponsors, procurement savings are often an important part of the value-creation plan. When the business is sold, an acquirer will test those savings and discount anything that cannot be supported by evidence.
MomentumX takes this from baseline design and savings verification through implementation and value delivery.
For the worked model behind this analysis, or to discuss the category: [email protected]
Bain describes the shift as twelve is the new five. Its deal-cost index combines purchase multiples and financing costs, and it is at a record level. There are also around 33,000 unsold portfolio companies, distributions have been unusually low for four years, and implied holding periods are now around seven years. In that environment an acquirer has more reason to examine the earnings bridge carefully.
Three terms matter. The baseline is the price or cost a saving is measured against, and it should be agreed before the work starts. The gate is the review that checks whether the saving is supported by evidence. The bridge is what an acquirer reads at exit. It shows how profit moved from one period to the next and what caused the change.
The same Bain report gives mixed signals on valuations. An MSCI analysis found that roughly three quarters of buyout assets exited above their next-to-last quarterly mark, broadly in line with history. An ILPA poll found that most limited partners lose confidence when a full exit is more than 5% below the last mark, and around one in five would reduce buyout allocations as a result.
The secondary market shows how much scrutiny is now applied to existing assets. PitchBook, citing Evercore, reported more than $120 billion of secondary volume in the first half of 2026, 20% above the previous record. GP-led deals made up close to 54%, continuation funds accounted for 86% of GP-led transactions by count, and single-asset vehicles reached $34 billion. Secondaries dry powder fell 10% and the capital overhang multiple moved close to 1.0x.
Investors are also paying more attention to realised cash returns. Pensions & Investments, citing PitchBook and PwC, reported that limited partners are focusing more on distributions to paid-in capital than on headline IRR. Managers with strong realised distributions and credible value-creation plans are raising money more easily, while others are struggling. Foley & Lardner reached a similar conclusion from the deal side. Activity remains resilient, and capital is constrained.
The message is consistent even where the data points differ. Acquirers and investors are looking harder at the quality of earnings. What none of these reports tells you is exactly what the reported earnings growth is made of.
Bain says deals now need 10–12% annual EBITDA growth. In many mid-market industrial, consumer and healthcare businesses, procurement savings are one of the fastest ways to improve earnings in the first 18 months after close.
The same problem appears repeatedly across the 729 portfolio companies held by the 47 Asian private-equity firms mapped this year. It appeared just as often across my own two decades at Disney, Nike, Unilever and P&G. The negotiation may have delivered a real saving. What is often missing is a record that lets Finance, or a future acquirer, prove it.
The trail usually breaks in three places. First, the baseline is not agreed before the sourcing work begins, so it is reconstructed later by whoever reports the saving. Second, the approval gate checks that someone approved the saving, but not necessarily that the evidence supports it. Third, the saving is not tied to a specific budget line. That is the one that costs most. The business may keep and spend the released budget, or the same saving may be claimed in more than one place.
This can happen even in well-run programmes. The savings tracker manages initiatives. The accounts record actual transactions. Unless somebody is responsible for reconciling the two, they can drift apart for years. By the time an acquirer asks, the people who set the original baseline may no longer be there.
At diligence the acquirer asks for the claimed run-rate to be reconciled to the accounts. If only part can be found, the rest is challenged or marked down. The saving may have been genuine. What has been lost is the evidence needed to get credit for it in the valuation.
A rate-based baseline makes that evidence easier to preserve. Instead of recording only a total spend number, it records the price or rate against an objective reference. Total spend becomes hard to compare once volume and mix change. A rate can still be rechecked later.
Take a portfolio company with £400 million of addressable third-party spend and a two-year programme reporting 6% savings, or £24 million. At exit the acquirer's team asks to reconcile that figure to the accounts.
Assume £9 million has a baseline agreed before the sourcing wave, evidence that passed the approval gate, and a matching budget reduction in the same period. The other £15 million has an approval and a tracker entry but no clear evidence in the accounts. The £9 million is easy to include in the earnings bridge. The remaining £15 million becomes a negotiation with the acquirer and may receive only partial credit.
At an 11x multiple the evidenced £9 million supports £99 million of enterprise value. If the remaining £15 million receives half credit, total value is £181.5 million instead of the possible £264 million. The difference is roughly £82 million. Nothing changed in the supplier negotiation. The difference comes from how well the saving was evidenced. The figures are illustrative, and the principle is very real.
The fix is inexpensive compared with the value at stake. Agree and sign off the baseline before the sourcing wave begins. Require evidence before a saving passes the gate. Reduce the relevant budget in the same period that the saving is approved. That last step is often missed, and it is what makes the saving visible in the accounts whether or not anyone looks for it later.
The Four-Lever Framework™ helps prevent double counting by separating value into price, specification, demand and cadence. The Value Realisation Tracker™ then follows realised savings into the accounts each quarter. Together they create the evidence trail that an acquirer can review at exit.
The worked file behind this piece is available on request: [email protected].
From the first board meeting after close, every claimed saving should be linked to a named ledger account and a budget reduction in the same period. The quarterly value report should reconcile to the management accounts. This discipline should start with the first sourcing wave, not after the pilot.
The main objection is that the reported savings number may fall sharply in the first two quarters. Management teams may worry that this hurts morale or makes the board pack look worse. There is also a genuine accounting issue. Some value, especially avoided demand or specification changes, does not naturally create a ledger line because the purchase never happened.
The first problem is temporary, and the alternative is to let an acquirer apply the discount at exit. The second needs different treatment. Record avoided costs separately and do not mix them into the earnings bridge. An acquirer may accept a well-supported avoidance number as useful context, and it is unlikely to pay the same multiple for it as for a realised saving in the accounts.
MomentumX can take the work from baseline and evidence design through implementation to an earnings bridge that can stand up to diligence.
For companies, the risk is a procurement programme reporting savings that Finance has never fully confirmed. That becomes a problem at refinancing, during a transformation review, or when the business is sold.
For consulting teams, savings traceability is often requested only after the sourcing work is finished. Building it at that point is much harder than building it into the programme from the start.
For private-equity sponsors, the required earnings growth has roughly doubled, and acquirers have not become more tolerant of unsupported numbers. Procurement is often one of the largest unverified lines in the value-creation bridge.
The practical question is simple. Which savings in the bridge would survive diligence, and what evidence supports each one?
For the worked model behind this article, a Confidential Spend Review of a specific category or contract, or a discussion on an APAC cost programme: [email protected]
MomentumX works from opportunity identification through commercial strategy, negotiation, implementation and verified value delivery.
A Confidential Spend Review — a senior look at a single category or contract, on client data under a non-disclosure agreement or on an illustrative basis.
Or the Spend Exposure Index, a confidential self-assessment completed privately, with no data shared.
Written by Chandranath Chakraborty, Founder & Managing Partner, MomentumX Consulting. Two decades running procurement for The Walt Disney Company, Nike, Unilever and Procter & Gamble, with structural cost reductions above 12 per cent across a US$1B+ regional spend base in his most recent role. LinkedIn · [email protected]