In recent years, we’ve witnessed a seismic shift in the business landscape. The once-celebrated approach of “growth at all costs” has given way to a renewed focus on traditional business fundamentals. This isn’t merely a cyclical trend but represents a fundamental reorientation in how businesses are evaluated, managed, and valued in today’s market.
The Return to Profitability
The data tells a compelling story. According to Pitchbook’s “Global Private Equity Report” 73% of private equity acquisitions now target profitable companies—a significant increase from just 51% in 2021. This shift reflects a broader market recalibration toward sustainable business models with clear paths to profitability.
The Financial Times, in partnership with Russell Reynolds Associates, reported that 78% of Fortune 500 CEOs now prioritize immediate profitability over growth-at-all-costs. This represents nearly a doubling from the 41% who prioritized profitability just three years earlier.
Jamie Dimon, JPMorgan Chase CEO, succinctly captured this sentiment in The Wall Street Journal: “We’ve entered an era where capital efficiency and return on investment are once again the primary metrics by which businesses should be judged. The market is no longer rewarding promises of future profitability without clear evidence of a path to get there.”
Private Equity’s Return to Fundamentals
The private equity sector offers perhaps the clearest evidence of this shift. Bain Capital’s “Private Equity Market Review” reported that the average EBITDA multiple paid for acquisitions has decreased from 15.2x in 2021 to 10.8x in 2024, indicating a more conservative approach to valuations.
KKR’s Henry Kravis noted in a Financial Times interview: “The private equity industry has returned to its roots. We’re looking for companies with strong fundamentals and opportunities for operational improvement. The days of acquiring businesses at 20x revenue multiple with no clear path to profitability are behind us.” KKR reported that 82% of their 2023-2024 acquisitions were of companies with positive operating profits, compared to 64% in their 2020-2021 portfolio.
Similarly, Apollo Global Management revealed during their Q1 2024 earnings call that their recent fund had a mandate requiring 85% of investments to be in profitable enterprises, up from 60% in their previous fund. CEO Marc Rowan explained: “Our limited partners are seeking stability and predictability. They’ve made it clear they want exposure to profitable businesses with proven business models.”
Technology with Tangible Returns
Even the technology sector, long the bastion of growth-over-profit thinking, has not been immune to this shift. Andy Baldwin, Global Managing Partner at EY, reported in their “Technology Value Report” that 72% of companies now require clear ROI calculations before authorizing significant technology investments, a substantial increase from 46% in 2022.
Sarah Friar, former CFO of Square (now Block) and current CEO of Nextdoor, observed: “The days of unlimited innovation budgets without accountability metrics are over. Every technology investment needs to demonstrate tangible operational improvements or revenue enhancements within a reasonable timeframe.”
The Leadership Talent Implications
This return to fundamentals has profound implications for leadership talent. McKinsey’s “Future of Leadership” study noted that the percentage of CEO appointments with previous CFO experience increased from 17% in 2021 to 31% in 2024. Boards are increasingly seeking leaders with strong financial acumen and proven capabilities in capital allocation.
Keith Bevans, Global Head of Consultant Recruitment at Bain, observed a 47% increase in executive searches emphasizing operational excellence over purely visionary leadership qualities. “Companies are looking for leaders who can optimize existing business models rather than simply disrupting them,” he explained.
Conclusion: A New Era Demands a New Approach
As Martin Reeves of BCG noted, the shift we’re witnessing “represents not just a tactical adjustment but a fundamental strategic reorientation.” In this new era of financial discipline and focus on traditional business metrics, your talent strategy must become your value strategy.
If you’re ready to build a leadership team that delivers measurable value in today’s market, I invite you to learn more about our value-driven approach. Connect with me directly to discuss how we can help your organization thrive in this new business landscape.