How Private Equity GPs Can Use Pricing to Build Value

Private equity funds in Australia are chasing higher returns across increasingly complex deals. According to recent industry analysis, deal volume has lifted by 14 % in Q1 2025, with funds under management now exceeding $70 billion. With fewer easy wins from multiple expansions or debt restructuring, GPs are turning their attention to operational drivers of value—specifically, pricing, structure, and execution.

1. Pricing: The Underutilised Lever

Pricing is still the most powerful—but least exercised—lever in a PE firm’s toolkit. A 1 % price increase can deliver up to a 6 % improvement in operating profit, far outstripping the gains from minor cost reductions. Yet in practice, pricing decisions remain inconsistent, decentralised, and often disconnected from the company’s value proposition or customer segmentation model.

In the middle market, this challenge is acute. Founders and CFOs often default to cost-plus formulas, legacy discount rules, or fear-based pricing driven by sales teams reluctant to push rate increases. Even in more sophisticated firms, there’s often no embedded pricing governance process—just occasional reviews and blanket increases with no reference to pricing power or customer willingness-to-pay.

Strategic pricing execution can include:

• Value-based pricing models that reflect the economic impact delivered to customers
• Customer segmentation and fencing rules that match prices to different use cases or buyer types
• Structured discount governance to prevent unnecessary erosion of margin
• Transparent escalation rules for exceptions, rather than ad-hoc approvals or back-door deals

Where these are implemented, portfolio companies regularly achieve between 200–900 basis points of margin improvement in the first 12 months, depending on their starting point and commercial maturity. In most cases, this is done without harming volume or growth trajectory.

2. Deal Structure: Engineering Alignment from Day One

GPs focused on pricing performance often start early—at the term sheet and investment committee stage. Deal structure can create the conditions for pricing discipline by embedding economic incentives, controls, and expectations into the transaction.

Key examples include:

• Earn-outs and tranches tied to pricing and gross margin targets, not just revenue or cost
• Retention bonuses for management teams aligned to EBITDA margin uplift
• Shareholder agreements that assign pricing decisions to dedicated sub-committees or governance forums

This ensures that pricing becomes a board-level lever—one that is considered during integration planning, not as an afterthought once post-deal chaos has settled.

It also signals to the CEO and commercial teams that pricing performance is core to the investment thesis—not something to be revisited in year three when targets are missed.

3. Operations: Making Price Stick

Even with the right pricing strategy and structural incentives, implementation is where most pricing projects fail. Without operational discipline, margin improvements are short-lived or never materialise.

There are three common failure modes:

1. Sales team inertia: Salespeople revert to old behaviours, using price as a closing tool and applying discounts inconsistently.
2. Systems misalignment: Pricing rules are buried in spreadsheets or overridden in ERP and CRM systems.
3. Lack of accountability: No single function owns pricing, and there’s no structured governance or reporting.

To counter this, leading GPs and their portfolio companies apply the following playbook:

• Rapid diagnostic (within 4–6 weeks post-close) to assess current pricing structures, leakage points, and commercial architecture
• System upgrades or rules engines to reflect the new pricing strategy and prevent override
• Training and enablement programs for sales and finance teams on value-selling, pricing psychology, and negotiation tactics
• Monthly pricing forums and dashboards to track price realisation, exceptions, and margin health
• Annual review cycles to adapt pricing models to changing market dynamics, input costs or competitor moves

With this structure in place, pricing becomes a core competency—owned, measured and embedded into the DNA of the business.

4. Why CEOs Struggle to Lead Pricing Change Alone

Most CEOs recognise pricing is important. They’ve seen the impact in competitor businesses or read about its influence in investor presentations. But they also face internal constraints:

• No pricing function or expertise in-house
• Systems that make change slow or risky
• Sales team pushback and lack of incentive alignment
• Limited time to lead a cross-functional commercial transformation

This is where many GPs get stuck. The CEO is bought in. The board sees the opportunity. But nothing moves.

What’s missing is external momentum—an experienced pricing partner who can assess the business, bring in the right methodology, and help embed the capability across commercial, finance, sales and product teams.

5. What Pricing Insight Delivers

Pricing Insight works with GPs and their portfolio companies to unlock the commercial and cultural changes required for sustainable margin uplift.

Their program typically includes:

• A full pricing diagnostic within 30–45 days of engagement, highlighting immediate quick wins and longer-term strategic actions
• Design and implementation of pricing structures aligned to product value, customer segmentation, and commercial roles
• Sales enablement tools and negotiation guides, with practical templates and playbooks
• Governance structures and performance dashboards for ongoing monitoring and accountability
• EBITDA uplift between 3–9 % on revenues influenced by the program, with documented ROI typically between 7x and 10x

Unlike generic consultants, Pricing Insight embeds with management and operational teams—focusing less on theoretical frameworks and more on commercial execution.

Their work helps build internal ownership, ensuring pricing improvements last well beyond the initial project and create value at exit.

6. Margin Expansion without Revenue Risk

GPs are often cautious of interfering with pricing—concerned it might upset customers, reduce volume, or stall growth.

But real-world results consistently show otherwise.

When done well, pricing strategy doesn’t mean higher prices for everyone. It means better alignment between value delivered and price paid. That can mean:

• Reducing discounts for customers who don’t need them
• Charging more for services that drive measurable impact
• Creating entry-level offers to win share while preserving premium margin tiers
• Ending blanket price increases and instead applying data-driven segmentation logic

The result? Higher quality of earnings. Lower volatility. Less revenue at risk during price resets. And greater confidence at exit.

7. A Blueprint for GPs

For GPs seeking to embed pricing performance across their portfolios, here’s a 5-step blueprint:

1. Start with an audit
   Assess pricing performance across top holdings. Identify which companies have pricing strategy, governance, and operational controls in place—and which don’t.
2. Set margin targets by value lever
   Define how much EBITDA uplift you expect from pricing, cost efficiency, product mix, or cross-sell. Make it visible.
3. Structure deals to incentivise pricing discipline
   Don’t rely solely on revenue or cost metrics. Make margin uplift part of management incentives.
4. Bring in external capability early
   Don’t expect internal teams to design and implement pricing programs alone. Use a partner like Pricing Insight to accelerate momentum.
5. Report pricing gains to LPs
   Pricing-driven margin expansion is bankable value creation. Quantify it. Publicise it. Use it to support future raises.

Pricing is the Fastest Path to Value Creation

With deal multiples high and operational complexity rising, GPs need more than financial engineering to drive returns. Pricing remains the most direct route to EBITDA growth—and often the most underexploited.

Yet CEOs, while broadly aware of pricing’s importance, rarely have the internal capability to lead change. Without external support, initiatives stall or get diluted.

Pricing Insight exists to close that gap. Their structured, hands-on programs deliver margin gains quickly and build the internal capability to sustain those gains beyond the hold period.

If you’re a GP looking for a margin uplift in your portfolio—or preparing an asset for exit—now is the time to call.

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