Generative AI is not just another wave of innovation – it is a systemic shift that is reshaping industries, operating models, and the future of work. Unlike previous technology disruptions, where many firms moved too slowly, businesses today are leaning into AI with unprecedented urgency. Nearly 90 percent of enterprises report active AI transformation efforts. However, according to research conducted by McKinsey & Company, only 5 percent of adopters said they have succeeded in transforming even a single business domain to achieve a measurable bottom-line impact. For private equity firms, this marks both an inflection point and an imperative: adapt now or risk falling behind.
Fronts of Disruption in Private Equity
AI Impact on Accelerating Sector Level Change
AI is transforming value chains differently across sectors. In some industries, automation is rapidly streamlining operations, improving decision making, and reducing labor needs for routine tasks. In others, AI is unlocking new business models, from predictive services to dynamic pricing. For investors, the challenge is to identify which sectors are ripe for disruption and how that disruption will shift competitive dynamics, cost structures, and margins. Understanding the pace, potential, and magnitude of AI’s impact on a sector or business is becoming essential to underwriting.
The Evolution of Deal Origination and Underwriting
Change is not just being affected at an industry level, the investment process itself is being reshaped. AI tools are helping firms identify less conspicuous investment opportunities by mining proprietary and market data sources to surface early signals of potential targets well before they come to market. During diligence, AI is being used to improve the data analysis processes by accelerating data room reviews and flagging inconsistencies. The wider-reaching and faster-processing capabilities of AI are enabling faster, more confident decision making by PE managers. These tools and approaches give firms the ability to move the quickest from data to insight to conviction, gaining an edge in competitive processes.
The PE Firm as an AI Enabled Enterprise
Internally, private equity firms are applying AI to scale operations more efficiently. Functions like finance, investor relations, legal, and IT are increasingly being augmented by AI agents, allowing teams to focus on higher value strategic work. As firms grow in size and complexity, the ability to maintain margins and operating leverage will depend on how effectively they embed AI into core processes. But to lean into these efficiencies, Firms must have team buy-in. According to the 2025 AI & Data Leadership Executive Benchmark Survey, referenced by Harvard Business Review, over 90% of respondents believe that culture and people are the barriers to establishing AI-related change, not the technology.
Talent Transformation in the Age of AI
AI adoption will not eliminate related jobs entirely, but it will significantly reshape them. Repetitive, manual tasks – especially in diligence, reporting, and support functions are rapidly being automated. This shift elevates the importance of skills like critical thinking, communication, cross functional judgment, and relationship building. For junior professionals in particular, success will depend on the ability to work alongside AI, asking the right strategic questions, interpreting outputs, and applying business context. These shifts should also reshape hiring patterns in the short term, until university programs evolve their curriculum. Firms will need to invest not just in tools, but in talent development and training programs that reflect this new reality.
Key Takeaways for PE Firms
- Develop a roadmap: With new AI tools and capabilities flooding the market, it’s important to focus internally – create a roadmap and develop specific use cases and then find the right tools to support the end goals.
- Proactively assess sector risks and opportunities: Identify where AI creates new value, opportunities, threats or tailwinds in portfolio and pipeline companies.
- Experiment with urgency: Test AI tools in deal sourcing, diligence, and operations with measurable outcomes.
- Reskill the workforce: Equip teams with the business judgment and technical fluency to collaborate with AI.
- Redesign for scale: Use AI to optimize back-office functions and maintain efficiency as the firm grows.
- Measure business impact: AI initiatives should be tied to specific productivity gains, revenue lifts, or cost savings.
The firms that succeed in this next chapter will not just adopt AI—they will reimagine how they invest, operate, and build talent in a world where intelligence is no longer solely human.
Sources
Bain & Company: Dry powder – Gen AI in PE: Game Changer or Work in Progress
Financial Times: AI is promoted from back-office duties to investment decisions
Financial Times: AI in finance is like ‘moving from typewriters to word processors
WSJ: Why Companies Are Already All-In on AI After Arriving Late to Everything Else
Harvard Business Review: How Private Equity Firms Are Creating Value with AI
2025 AI & Data Leadership Executive Benchmark Survey
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