When Operating Partners and Lender Monitoring Teams Collaborate: The New Value Creation Paradigm

Two groups that once viewed each other with adversarial mindsets —private equity operating partners and lender monitoring teams — are increasingly finding common ground, creating collaborative relationships that drive value creation across portfolio companies.¹ This evolution reflects broader changes in both private equity and private credit markets. As hold periods extend, operational improvements become the primary driver of returns, and lenders take more active roles in portfolio oversight, the traditional boundaries between equity and debt stakeholders are blurring.

The results can be transformative. When PE operating partners and lender monitoring teams work in harmony, portfolio companies benefit from complementary expertise, aligned incentives and a unified approach to accelerating growth, manage risk and ultimately drive higher returns for all stakeholders. According to Secured Research analysis, private credit firms with specialized monitoring teams that include former operators see 24% fewer covenant defaults and 18% higher realized returns compared to traditional credit-only monitoring approaches.²

The Evolution of Private Equity Operating Partners

Private equity operating partners have evolved significantly from their origins as part-time advisors or retired executives serving on boards. Today’s operating partners are sophisticated value creation specialists with deep industry and functional expertise who drive operational transformation across portfolio companies. Since 2010, 47% of value creation has come from operations, up from 18% in the 1980s.³

This evolution reflects a fundamental shift in how private equity creates value. With high acquisition multiples and compressed returns, financial engineering and multiple expansion are no longer sufficient. According to PwC analysis, “many PE firms find their desired deal returns by moving beyond traditional financial engineering and cost containment to true investment back into the underlying portco’s business model. Operating partners are improving their portco’s talent structure, pricing models, commercial excellence, Gen AI programs, tax strategy and/or some combination of the above.”⁴

The industry has moved from advisory to directive approaches. Operating partners now gain board seats, hiring authority and decision-making rights. Some firms include heads of operations on investment committees —a dramatic change from 10-12 years ago when the advisor model dominated.⁵ Major platforms have built substantial operating capabilities: Bain Capital’s Portfolio Group employs 115+ operating professionals organized by functional areas; Blackstone appointed Rodney Zemmel (former McKinsey Digital leader) as Global Head of Portfolio Operations in February 2025; Apollo’s Portfolio Performance Solutions expanded to approximately 35 full-time professionals as of July 2025.

The Transformation of Lender Monitoring

Simultaneously, private credit lenders have transformed their approach to portfolio monitoring. What was once primarily a risk management function focused on covenant compliance has evolved into a sophisticated value-adding capability that actively contributes to portfolio company success.⁶ Academic research confirms that debtholders’ involvement on borrower-firm boards adds value to the firm and helps private credit funds achieve their investment strategy.

Modern lender monitoring teams now include former operators, industry specialists and financial advisors who bring valuable perspectives and resources to portfolio companies. They no longer view their role as simply protecting the downside but increasingly as contributing to the upside as well. As KKR notes in its 2025 Private Credit Outlook, “if things do turn, we have the tools—including a dedicated workout team, portfolio monitoring, and legal resources—to respond quickly. We are also often the sole or lead lender, which gives us the ability to actively manage through any issues.”⁷

The infrastructure supporting this evolution has expanded significantly. S&P Global and Maestro announced a strategic partnership in August 2025 to deliver enhanced portfolio monitoring capabilities, integrating Maestro’s value creation platform with S&P Global’s iLEVEL portfolio monitoring system.⁸ According to S&P Global, the partnership enables firms to “measure the impact of their value creation initiatives, identify the highest-yielding value levers and improve transparency” from portfolio companies to GPs to LPs.

The Foundation for Collaboration: Aligned Incentives

The collaboration between PE operating partners and lender monitoring teams is built on a foundation of shared objectives that transcend their different positions in the capital structure. Both groups ultimately succeed when portfolio companies thrive — for PE firms, improved performance drives equity returns; for lenders, it ensures debt service and reduces default risk. This fundamental alignment creates a natural basis for collaboration.⁹

Extended hold periods — now averaging 6.7 years according to McKinsey, the longest since 2005 — intensify this alignment.¹⁰ When sponsors hold assets longer, operational excellence becomes more critical to maintaining value and achieving exit-ready positioning. Lenders benefit from sustained debt service over extended periods. Both parties have incentive to invest in improvements that drive long-term value rather than short-term financial engineering.

EY’s 2025 Private Equity Trends emphasizes that “change management and collaboration received increased emphasis” as PE firms manage larger and more diverse investments requiring back-office transformation, people-centric approaches and intensified collaboration between deal executives and operating partners.¹¹This collaborative imperative extends naturally to lender relationships where both parties increasingly recognize that portfolio company success benefits all stakeholders.

Practical Collaboration: From Information Sharing to Joint Problem-Solving

The most sophisticated PE-lender relationships have evolved beyond periodic reporting into genuine strategic partnerships. Firms increasingly invest in advanced analytics platforms and data management systems, implement direct pulls from portfolio company ERP systems for full operational visibility and establish “transformation management offices” tracking key initiatives.¹² This transparency benefits lenders who gain real-time insight into operational performance rather than relying solely on quarterly financial statements.

When portfolio companies face challenges, the collaboration becomes even more critical. Rather than adopting adversarial positions, these teams increasingly work together to develop turnaround plans that preserve value for all stakeholders. In distressed situations, private credit lenders often bring specialized workout expertise that complements the operational capabilities of PE operating teams. Together, they can implement more effective restructuring plans than either could develop independently.¹³

Beyond risk management, operating partners and lender monitoring teams collaborate on proactive value creation initiatives. Private equity funds aim to create value through various operational and strategic initiatives; when lenders actively support these initiatives — through flexible financing structures, additional capital for growth or access to their networks — portfolio companies can accelerate growth trajectories that benefit both equity and debt holders.¹⁴

Technology Enabling the Convergence

Technology infrastructure increasingly enables the operating partner-lender collaboration. According to Catalant’s Operating Partners Playbook, “boards and lenders are demanding greater financial transparency and control,” driving need for PE-specific reporting capabilities and value creation metrics.¹⁵ Finance executives with PE-specific experience who understand these reporting requirements can bridge the gap between operational execution and lender communication.

The Maestro-S&P Global partnership exemplifies this technology-enabled convergence. As Maestro CEO Prasanth Ramanand notes, “as driving operational alpha becomes increasingly central to private equity investing, firms are actively seeking end-to-end solutions that tightly integrate portfolio monitoring with value creation operations and execution.”¹⁶ This integration allows both operating partners and lender monitoring teams to work from common data, reducing friction and enabling faster collaborative decision-making.

AI is accelerating this convergence. According to Korn Ferry analysis, AI Operating Partners have developed playbooks to improve efficiency of functions like Finance and Accounting by 25% through AI and automation, with similar gains in customer service, marketing, customer support, inventory management and legal.¹⁷These efficiency gains translate directly into improved financial performance metrics that benefit both equity returns and debt service capacity.

Ecosystem Implications

For Private Credit Lenders and Specialty Finance Providers: The evolution of monitoring capabilities has become a key differentiator. Lenders who invest in monitoring teams with operational expertise — not just credit analysis skills — can identify issues earlier, contribute more effectively to problem-solving and ultimately achieve better portfolio outcomes. According to Secured Research, this investment translates directly into performance: lower defaults, higher recoveries and improved realized returns. The 47% increase in hiring of ABL professionals by private credit funds reflects recognition that operational understanding drives credit performance.

For PE Sponsors: Collaborative lender relationships create optionality that adversarial relationships foreclose. Sponsors who establish track records of transparent communication and shared problem-solving find lenders more willing to provide flexibility during challenging periods, support add-on acquisition financing and structure creative solutions when traditional approaches prove insufficient. The operating partner’s ability to communicate effectively with lender monitoring teams — speaking their language, understanding their concerns — becomes a core competency rather than a delegated function.

For Investment Bankers: Deal execution increasingly requires understanding the operating partner-lender dynamic. Sell-side processes benefit when bankers can demonstrate to prospective buyers that existing lender relationships are collaborative rather than contentious. Buy-side advisory requires assessing not just the credit structure but the quality of sponsor-lender relationships that the buyer will inherit. Capital raising mandates must account for lender preferences regarding operating partner involvement and reporting infrastructure.

For Legal Advisors: Documentation is evolving to reflect collaborative expectations. Credit agreements increasingly include provisions for information sharing, joint planning sessions and coordinated responses to covenant events. Legal advisors who understand the operational dynamics — not just the credit mechanics — can draft more effective agreements that facilitate rather than impede collaboration. Workout situations particularly benefit from legal counsel who can bridge the traditionally separate worlds of equity and debt stakeholders.

For Turnaround Advisors: The collaborative model changes restructuring dynamics. When operating partners and lender monitoring teams have established working relationships before distress emerges, turnaround advisors can leverage that foundation rather than building relationships under crisis conditions. Conversely, situations where sponsor-lender relationships have been adversarial require additional effort to establish the trust necessary for effective restructuring. Turnaround professionals who understand both operational improvement and credit dynamics bring particular value to these complex situations.

Looking Forward: Institutionalizing Collaboration

The convergence of PE operating partners and lender monitoring teams represents a structural shift rather than a cyclical phenomenon. As private credit assets under management grow toward an expected $3 trillion over the next five years according to EY projections,¹⁸ the infrastructure supporting collaboration will continue to expand. Technology platforms enabling shared visibility, talent migration between equity, credit functions and institutional expectations for collaborative behavior will all accelerate this trend.

For market participants, the implication is clear: the traditional model of arm’s-length, occasionally adversarial relationships between sponsors and lenders is giving way to a partnership model where both parties invest in portfolio company success. Those who embrace this evolution — building the capabilities, relationships and infrastructure to collaborate effectively — will outperform those who cling to traditional boundaries. The operating partner who views lender communication as a burden rather than an opportunity, or the lender who sees monitoring as pure risk management rather than value creation, will find themselves at competitive disadvantage.

According to Secured Research projections, by 2027 more than 60% of private credit facilities in the middle market will include formal provisions for operating partner-lender collaboration, up from approximately 25% today. The firms building these capabilities now will be positioned to capture disproportionate share of the market’s continued growth — while those who delay will find the competitive gap increasingly difficult to close.

Sources:

1. ABF Journal, Operational Value Creation: The Collaboration Between PE Operating Partners and Lender Monitoring Teams, June 2025. https://www.abfjournal.com/operational-value-creation-the-collaboration-between-pe-operating-partners-and-lender-monitoring-teams/
2. Ibid.
3. Ibid.
4. PwC, Private Equity Industry Issues 2025. https://www.pwc.com/us/en/industries/financial-services/library/private-equity-trends.html
5. Press & Associates, The Private Equity Operating Partner: A Comprehensive Guide. https://www.pressandassociates.com/news/the-private-equity-operating-partner-a-comprehensive-guide-to-roles-compensation-and-value-creation
6. ABF Journal, Operational Value Creation.
7. KKR, Private Credit 2025: Navigating Yield, Risk, and Real Value, October 2025. https://www.kkr.com/insights/private-credit-outlook
8. S&P Global Press Release, S&P Global and Maestro Partner to Offer PE Firms Enhanced Visibility, August 2025. https://press.spglobal.com/2025-08-19-S-P-Global-and-Maestro-Partner-to-Offer-Private-Equity-Firms-Enhanced-Visibility-into-Asset-Level-Performance
9. ABF Journal, Operational Value Creation.
10. E78 Partners, Private Equity Value Creation in 2025: 5 Key Strategies for Growth, April 2025. https://e78partners.com/blog/private-equity-in-2025-five-key-levers-driving-value-creation/
11. EY, 2025 Private Equity Trends, February 2025. https://www.ey.com/en_us/insights/private-equity/2025-pe-trends
12. Press & Associates, The Private Equity Operating Partner.
13. ABF Journal, Operational Value Creation.
14. Ibid.
15. Catalant, Private Equity Guide: Operating Partners Playbook, October 2025. https://catalant.com/reports/private-equity-operating-partners-playbook/
16. S&P Global Press Release, August 2025.
17. Korn Ferry, The AI Operating Partner: The Latest PE Portfolio Value Creation Role. https://www.kornferry.com/institute/the-ai-operating-partner-the-latest-pe-portfolio-value-creation-role
18. EY, 2025 Private Equity Trends.