by Mark HuYoung
Let me start with a confession. The catalyst for this was a bit of weekend reading with the World Cup Finals on in the background.
Bain’s 2026 Global Private Equity Report states “Twelve is the New Five,”and I immediately thought about the leaders and investors I watch wrestle with what that means in practice.
So, yes, I stole part of the working title from Bain. They made the very good and true point first in that report, and I’m just here to explain why it matters for the people who have to deliver the EBITDA.
In plain English, twelve is the new five means the math got harder. A deal that used to work with roughly five percent annual EBITDA growth now often needs something closer to ten to twelve percent to produce the same return.
So, what happened? The old private equity playbook became less forgiving. Interest rates are higher, leverage is lower, and the easy help from rising valuation multiples is mostly gone. Firms cannot lean on the same tailwinds they had a decade ago, and that means the operating engine now has to carry a lot more of the load.
In other words, the deal does not work unless the business does. The days when five percent annual EBITDA growth plus generous multiples could quietly carry a two and a half times outcome are fading fast.
From where I sit at NorthWind, this is where our worlds converge. Deal partners feel the pressure to underwrite higher growth, and management teams feel the pressure to deliver it. The gap between those two realities is either bridged by a leadership system or exposed as a problem.
You can probably guess which version shows up more often.
You Do Not Have an EBITDA Problem First
When I look across portfolio companies we touch, the limiting factor is rarely the thesis on paper. It is rarely the deck. It is usually the leadership system.
You can see the pattern:
- The company cannot make decisions fast enough.
- The leadership team is strong individually but weak collectively.
- The right people are not in the right roles.
- The operating rhythm is too loose for the plan.
- Accountability exists in the investor memo and disappears in the operating review.
None of those show up in the CIM. They show up in the outcome.
The good news is that these things are fixable. Not with a slogan and not with one more town hall. With architecture.
What I Mean by “Leadership System”
Leadership system can sound like something you hire a consultant to name, then forget after the offsite.
I mean something more practical.
A leadership system is the way a company:
- decides who owns what,
- sets and reviews priorities,
- puts the right people in the right seats,
- allocates capital to real opportunities,
- and turns all of that into repeatable behavior instead of one-off heroics.
It is the operating system behind the EBITDA growth rate the model assumes.
In a strong system, leaders know which decisions they own, which metrics matter, what cadence they operate on, how issues get surfaced and escalated, and what “good” looks like in a particular business.
In a weak system, everyone works hard, the dashboard looks busy, and the plan quietly drifts off course quarter by quarter while people blame “the environment.”
I have watched both. One looks like leadership. The other looks like a slow-motion write-down.
Five Systems That Move EBITDA
If you sat me down with a sponsor and a CEO facing the “twelve is the new five” reality and asked, “Where do we start?” I would come back to five systems.
Not grand theories, but the stuff that shows up in board decks and Monday mornings.
One: Decision Rights
Every scaled business eventually develops decision fog. The more ambitious the plan, the more expensive that fog becomes.
If pricing is half owned by sales and half owned by finance, then nobody really owns margin. If the COO quietly vetoes every new product in the name of efficiency, then the growth story dies in the operations meeting. If the CEO is the unofficial tiebreaker on everything, then nothing moves when they are not in the room.
Clear decision rights do three simple things. They create speed, reduce rework, and make it obvious who needs to be better or different.
Speed and clarity are not abstractions. They show up as a better mix, cleaner cost decisions, tighter CapEx, faster exit readiness, and yes, better EBITDA.
I have seen this more than once. In one PE-backed search, we were brought in after a CEO flameout that, at first glance, got blamed on market conditions. Once we got into the real conversations, the problem was more basic and fixable: nobody had ever made a clean call on who owned pricing and customer profitability. Sales chased volume, finance chased cost cuts, operations chased efficiency, and the CEO spent half the week acting like a referee. Everyone was busy, and nobody was clearly accountable for the economics.
When the sponsor finally clarified that commercial leadership owned pricing and profitability, gave the CFO a real guardrail role, and stopped using the CEO as a coin toss with a laptop, the business did not magically become easy. It did, however, become directional. The next CEO knew what they were signing up for, and the P&L started moving again.
Two: Operating Cadence
Companies cannot grow faster than their management rhythm.
Weekly and monthly meetings are either ceremonies or engines. Ceremonies repeat information everyone already knows. Engines surface issues early, force choices, and send people out with clear next steps.
In practice, that looks like a short weekly session focused on the few leading indicators that really matter, a monthly operating review that forces real tradeoffs instead of polite updates, and a quarterly “how are we actually doing” conversation where leaders can tell the truth before the lender does.
When cadence is sloppy, everything feels urgent and nothing is truly important. People chase noise, and problems age quietly in the background.
I have watched companies spend ninety minutes in an operating review talking around an issue that should have been confronted in the first twelve. Everyone had the spreadsheet. Nobody wanted to own the implication. That is not operating cadence. That is group theater with coffee.
When cadence is disciplined, people know what hill they are supposed to take this week and this quarter, and they know which hills can wait.
That does not make the plan easier. It makes it possible.
Three: Talent density
This is the one that gets awkward, which usually means it matters.
You do not get twelve percent EBITDA growth with a leadership team full of close enough fits in critical roles.
I am not talking about perfection. I am talking about having real strength in the seats that carry the plan. That usually means commercial leadership, operations, finance, technology, and the roles in your specific thesis that create real value.
In our work, the pattern is almost boringly consistent. One weak functional leader drags down three or four other areas. An ill-matched CEO burns board and lender trust at a pace no operating partner can offset. A CFO who cannot see around corners turns every covenant discussion into a stomachache.
I have also seen sponsors wait six or nine months too long to make an obvious leadership change because everyone wanted to be “supportive.” Being supportive is admirable. It is not a strategy. By the time we get the call, the board is frustrated, the team is tired, and the business has spent two quarters pretending the problem is fixable with coaching alone. Sometimes it is. Often it is not.
Sponsors sometimes frame this as upgrading talent. From the inside, it feels more like finally having people around the table who can carry the weight of the plan.
If twelve is the new five, then a pretty good leadership bench is not enough.
Four: Accountability
Accountability gets a bad brand. People hear the word and imagine blame, criticism, and public shaming.
I mean something simpler.
Accountability is clarity plus follow-through.
In practice, that looks like clear goals that someone can remember without looking them up, named owners for those goals, and consistent follow-up that does not disappear when the quarter gets messy.
At NorthWind, we sometimes sit through updates where leaders talk about “the team” or “the organization” as if those are responsible actors. The board is usually thinking, “Whose job is this?”
I cannot tell you how many times I have heard some polished variation of, “We are all aligned on the need to improve execution,” which usually means nobody wants to say that one function is missing numbers, and everyone knows it. Accountability begins the moment someone says, calmly and without drama, “This sits with me, and here is what changes next.” Strange as it sounds, rooms get healthier when somebody finally stops speaking in corporate wallpaper.
The companies that move faster tend to have leaders who say sentences like, “I misread this signal and pushed the wrong priority. That is on me. Here is what we are changing and how we will track it.”
You can feel the room relax. Not because they enjoy mistakes, but because they trust that someone is driving the bus.
Five: Capital allocation discipline
Not all growth is created equal. Some growth is sugar. Some is nutrition.
In practical terms, some revenue improves margin quality, customer stickiness, and exit narrative, and some revenue looks good in the headline while quietly eroding value.
Leadership systems show up here when the company knows which products and customers create real economic value, which investments pay back fast enough for this hold period, and which initiatives are burning time and capital for very little return.
I have watched management teams defend pet initiatives with the emotional energy usually reserved for family heirlooms. Meanwhile, the board is doing the quiet math and wondering why so much leadership attention is tied up in something that is strategically fashionable and economically mediocre. A stronger system makes that conversation shorter and less sentimental.
In a twelve is the new five world, capital allocation discipline is not a finance-only topic. It is a leadership behavior.
The CEO who can say, “We are stopping this initiative. The return is not there, and we are redeploying capital and leadership attention into the three things that matter most,” is doing more for EBITDA than any motivational town hall.
Why This is Reality Now, Not Just a Catchy Phrase
It is easy to hear twelve is the new five as a clever line and move on.
It is not a clever line. It is the bill arriving.
For years, private equity returns benefited from low rates and generous multiples. More than half of buyout performance in the prior cycle came from multiple expansion, which hid a lot of sins.
Now, several things have converged.
Capital is more expensive. Leverage is tighter. Multiples are high but not rising in the same carefree way. Limited partners are more cautious and more focused on liquidity. And there are thousands of unsold assets sitting in portfolios, which means more scrutiny on actual operating performance.
Translated into daily life, that means longer holds, less help from market mood, and more pressure on the human beings running these businesses.
Some general partners will complain about this. The operators quietly smile. This is the part of the cycle where execution starts to matter again.
From NorthWind’s perspective, this is also the part of the cycle where leadership systems become the differentiator. Sponsors who treat human capital like a checklist item will struggle, and sponsors who treat it like an operating system will take share.
Why This Matters to PE and to the People They Back
Sponsors need sharper CEO selection, stronger operating partners, and honest leadership assessment in a harder cycle. They need to be able to look at a company and say, “This team plus this system can actually carry the plan,” instead of, “We hope it will.”
CEOs and operators need systems that can carry a higher bar without burning out people or reputations. They are the ones who live the twelve is the new five reality at two in the morning.
Both sides need a common language for what “we can actually deliver this plan” looks like.
If twelve is the new five, then “we will figure it out” is not a plan. It’s a red flag. Deal partners hear it as underwriting risk. Operators live it as sleepless nights. Leadership systems are how you turn that sentence into something the board and the team can believe.
What the Leaders Worth Backing Do Differently
Across the last decade in this chair, one pattern keeps showing up. The leaders worth backing are not the ones who sound most certain the fastest. They are the ones who build systems that can survive contact with reality.
In a twelve is the new five environment, those leaders tend to:
- Translate a thesis into three to five real priorities, not a wall of aspirations.
- Build a cadence that is fast yet sane so the team can actually sustain it.
- Upgrade talent deliberately, not reactively, even when the conversation is uncomfortable.
- Tell the truth early when something is off, instead of hiding behind spin.
- Use capital as a scalpel, not a bucket.
They also listen more than they talk, and they do not outsource their soul to the spreadsheet. They remember that people, not models, move EBITDA.
We are not asking leaders to become economists or to copy anyone’s graphs. We are asking them to recognize that the return model changed and the way they lead has to change with it.
Encouragement from My Chair
If you are a CEO, CFO, or operator reading this and quietly thinking, “I’m not sure my company is ready for twelve to be the new five,” you are in good company.
The point is not to panic. The point is to get intentional.
You do not fix this with one heroic quarter. You fix it by clarifying who owns what, tightening the operating rhythm, being honest about your team and making the hard changes, putting capital where execution and economics both make sense, and talking to your board and sponsor early instead of hiding from them.
From this side of the search table, the leaders who will be most in demand over the next few years are not the ones who got lucky in the easy cycle. They are the ones who can show they built or ran leadership systems that worked when the math turned against them.
Capital may still be a commodity. Leadership is not. In a world where twelve is the new five, leadership systems are the meaningful differentiator.
*Title phrase adapted from Bain and Company’s 2026 Global Private Equity Report.