Cash in hand eclipses paper gains

The new PE Imperative: Actual returns over theoretical valuations

The traditional "buy, build, and exit" model is facing a new reality. With unpredictable exit markets, constrained deal volumes, and prolonged holding periods, relying solely on theoretical valuations like Internal Rate of Return (IRR) is no longer enough.

Today, Limited Partners (LPs) are facing liquidity pressures and demanding actual cash returns. Distributions to Paid-In Capital (DPI) has emerged as the ultimate measure of success, serving as a real-time test of liquidity, operating discipline, and sponsor credibility.

Adapt to the "cash-first" market reality

A new KPMG’ report, Cash in hand eclipses paper gains, explores how the most successful PE leaders are pivoting their strategies. Rather than waiting for favorable exit conditions to return, forward-thinking firms are building portfolios designed to support multiple liquidity paths—such as partial sales and dividend recapitalizations—generating distributions earlier and more consistently.

Key Insights from the report:

The unmistakable shift to DPI: In a recent KPMG survey, 70% of PE dealmakers agreed that DPI has become a more important metric for evaluating performance.

Diligence reframed: Investment focus is moving from upside potential (EBITDA growth) to cash resilience. The new priority is ensuring the business can generate distributable cash reliably and quickly, even in downside scenarios.

Accelerated operating cadence: Rigid, long-term value-creation plans are being replaced by agile 6-to-18-month "cash cycles," designed to produce discrete, realizable cash outcomes and release liquidity faster.

Enhanced cash visibility: Cash flow is no longer just an outcome; it is a primary KPI. This requires deliberate process changes, smarter working capital management, and stronger forward-looking forecasts.

Build your DPI-aligned operating system

Firms that continue to optimize primarily for IRR risk misalignment with LP expectations. Those that adapt will be best positioned to restore momentum and credibility.

Dive into our thinking:

Ready to prioritize delivering distributions despite uncertainty?

Read the full report, which outlines a comprehensive six-pillar operating system to help you embed a cash-first mindset into your diligence, governance, and value-creation strategies.

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