How Private Equity Firms Are Using Manufacturing Strategy to Improve EBITDA
There is a quiet shift happening inside private equity. Most firms are still focused on revenue growth and cost control, but increasingly, the real opportunity is showing up somewhere else. Many portfolios are leaving 2 to 5 percent of EBITDA on the table—not because of revenue, but because of how their companies operate.
It is easy to think of EBITDA as something that gets solved in a model. Adjust the capital structure, manage expenses, drive top-line growth. But EBITDA is ultimately a reflection of how efficiently a business runs. When companies carry excess inventory, operate with long lead times, or absorb volatile logistics costs, those inefficiencies do not stay in operations. They show up directly in margin performance.
We continue to see a shift toward operational value creation as a primary driver of returns in private equity. That shift is putting manufacturing strategy squarely in focus. What used to be treated as an operational detail is now being recognized as a financial lever.
Many portfolio companies are still operating with global supply chains built around low unit cost assumptions. On paper, those models can appear efficient. In practice, they often introduce friction that compounds over time. Long production and transit cycles require higher inventory levels. Freight costs fluctuate unpredictably. Companies lose the ability to respond quickly to demand. None of these issues are isolated. Together, they create a steady drag on EBITDA.
Across portfolios, the patterns tend to repeat. Lead times stretch into weeks, inventory builds to compensate, and logistics variability makes planning more difficult than it should be. According to PwC, working capital tied up in inventory remains one of the largest untapped sources of value in many organizations. That alone should prompt a different way of thinking about operational strategy.
Instead of trying to optimize within the existing supply chain, more firms are stepping back and asking whether the structure itself still makes sense. Research shows that companies are actively redesigning supply chains to improve resilience, cost, and performance. Nearshoring is emerging as one of the most effective ways to do that.
By moving production closer to end markets, companies can materially reduce lead times, lower inventory requirements, and stabilize logistics costs. The benefit is not just operational efficiency. It is improved cash flow, faster revenue realization, and more predictable margin performance. In other words, the impact shows up exactly where private equity firms care most.
A practical way to think about this is to look for a few signals that tend to indicate underlying inefficiency. Are your lead times longer than six weeks? Are inventory levels consistently higher than forecast demand? Are freight costs fluctuating month to month? Are your portfolio companies struggling to respond to shifts in customer demand? If the answer to even a couple of these is yes, there is likely an opportunity hiding in plain sight.
What This Means for Your Portfolio
If these patterns exist in your portfolio, there is likely value being left on the table. Operational inefficiencies do not stay in operations. They show up in margins, cash flow, and overall EBITDA performance.
The firms that identify and act on these inefficiencies early are gaining a measurable advantage in both performance and exit outcomes. Those that wait often find these issues become harder to unwind over time.
If your portfolio is experiencing any of these patterns, there is likely a 2 to 5 percent EBITDA opportunity hiding in your operations.
The Nearshore Company works with private equity firms to identify and execute manufacturing strategies that improve cost structure, cash flow, and operational performance. We can help you identify that opportunity in as little as 30 days.And if you want a more structured view of how this plays out across a portfolio, download our playbook:
Nearshoring for Private Equity: A Playbook to Improve EBITDA Through Manufacturing Strategy
