Enabler, Accelerator, Emerging Threat: How Buyout Managers Leverage AI

Key Takeaways

• AI is rapidly becoming a key driver of innovation, growth, and efficiency in portfolio companies, though most are still in early adoption stages. Those that fail to take advantage of tangible benefits across operations, product, and customer engagement are more likely to fall prey to nimble, AI-native disruptors
• Buyout managers are increasingly prioritizing AI as a key value creator within their portfolio companies, recognizing its value in driving revenue growth and increased efficiency
• AI is also beginning to transform how buyout managers source and evaluate investments. Leading GPs are leveraging AI-driven scoring models, autonomous agents, and natural language models to augment sourcing and diligence, summarize research, and analyze proprietary sector-specific insights that can enhance competitive edge

Reframing the Investment Landscape

Artificial intelligence (AI), and generative AI in particular, is redefining the private equity investment landscape. The convergence of cheaper compute, more capable natural language models, and human-like interaction has taken AI from experimentation into production. As a result, AI is expanding the investable universe and accelerating change in industries where private equity is highly active — especially software, but also healthcare, business services, and financial services.

In software, AI is opening new pathways for value creation. Companies that embed AI into their products are shifting from selling tools to delivering outcomes. These shifts are being enabled by advances in natural language interfaces, domain-specific automation, and datadriven product design. For businesses that own or generate proprietary datasets, AI can significantly improve outcomes by enhancing customer experience, reducing friction, and increasing personalization.

The same technologies that enable innovation are also bringing disruption. Certain software categories are seeing increased commoditization as generative models reduce the value of standalone functionality. Switching costs are declining, and feature parity is easier to achieve. Investors therefore must think critically about what makes a software business durable in a world where interfaces and basic automation are no longer differentiators. Defensibility increasingly hinges on access to proprietary data, deep customer understanding, and mission-critical workflows.

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Embedding agentic and generative AI directly into core functionality allows companies to move beyond software budgets to capture a greater share of labor and services spend

For software as a service (SaaS) providers serving a specific industry, AI is expanding the traditional opportunity set to “work automation” from “workflow automation”. Embedding agentic and generative AI directly into core functionality allows companies to move beyond software budgets to capture a greater share of labor and services spend. Conversations with Adams Street GPs indicate that this could lift revenue per customer by multiples — potentially 5x or more — while increasing stickiness and pricing power.

Sectors including healthcare, business services, and financial services are also undergoing transformation. In healthcare, AI is being deployed in diagnostics, documentation, and administrative workflows, where it is both stripping out inefficiencies and improving patient outcomes. In financial services, AI is enhancing fraud detection and credit underwriting. In infrastructure and business services, AI helps to automate functions such as compliance, procurement, and customer support.

Across all sectors, one theme is clear: AI is changing the basis of competition. General partners (GP) and companies that fail to adapt may lose relevance, while those that embed AI into their operating models may enjoy outsized growth and margin advantages. For buyout investors, this means opportunity and risk are rising in tandem and navigating both will require new playbooks.

AI’s Impact on Buyout Portfolio Companies

Within their portfolios, buyout managers increasingly view AI as a lever for both revenue growth and efficiency gains. Most companies are still at the experimentation stage, piloting AI in specific functions before committing to broader implementation. Yet the impact is already tangible in several key areas.

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Buyout managers increasingly view AI as a lever for both revenue growth and efficiency gains. Most companies are still at the experimentation stage, piloting AI in specific functions before committing to broader implementation

• In operations, back-office automation tools are being deployed in finance, HR, and legal to reduce manual tasks, while code assistants are helping developers write faster and more accurately. Chat-based agents are improving customer support, while predictive tools are helping sales and marketing teams to improve targeting and conversion. Companies that successfully deploy these AI tools report improvements in cost efficiency, employee throughput, and time to insight.
• In product, conversational interfaces, intelligent recommendations, and autonomous agents are becoming embedded in SaaS products and digital platforms, allowing companies to launch new features and enhance user experiences. These advances are driving customer satisfaction and opening new monetization paths by helping to deepen engagement. In many cases, companies are experimenting with tiered pricing strategies that include AI-powered premium features.

While momentum is strong, AI adoption remains uneven across portfolios. Many companies are still building foundational capabilities — curating data, evaluating tools, and experimenting with workflows. Some private equity managers are supporting these efforts with centralized resources, offering shared AI labs, cross-portfolio summits, curated supplier lists, and technical advisors embedded on boards. These efforts help portfolio companies to move from experimentation to scaled impact.

Companies in sectors such as healthcare, consumer services, and industrials are seeing gains as AI is used to optimize labor scheduling, personalize outreach, enhance diagnostics, and forecast demand, among other functions. Often under-digitized, these sectors present an especially attractive opportunity for transformation by investors that can bring structured enablement and playbooks.

On the flipside, companies that rely on legacy workflows, thin data assets, or static product architectures may increasingly be exposed to AI-native challengers. Disruptors typically move faster, iterate more nimbly, and compete on user experience, not just features. Companies that lag in AI adoption, or lack the data assets or cultural readiness to experiment, face margin pressure and loss of relevance.

AI’s Impact on How Buyout Managers Operate

AI is also reshaping how buyout firms operate internally. Leading managers are increasingly integrating AI into workflows to enhance efficiency and decision-making across the investment lifecycle.

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GPs are experimenting with AI-enabled scoring models to prioritize deal flow, using autonomous agents to assist with outreach, and deploying large language models (LLMs) to synthesize conversations, company materials, and public filings

Sourcing is one area where AI is already making a tangible impact. GPs are experimenting with AI-enabled scoring models to prioritize deal flow, using autonomous agents to assist with outreach, and deploying large language models (LLMs) to synthesize conversations, company materials, and public filings. Rather than replacing traditional processes, these tools are augmenting deal teams’ capabilities, helping them surface and triage opportunities more efficiently.

In diligence and knowledge management, AI is improving how information is captured, accessed, and applied. Some firms are layering AI chat interfaces on top of proprietary deal databases and expert call libraries, making it easier to extract insights and reference historical work. Others are using generative tools to summarize investment memos, draft communications, and analyze market data. These tools do not replace investment judgment, they accelerate insight generation and reduce time spent on repetitive tasks.

On the operational side, AI is helping GPs improve productivity across functions such as investor relations, compliance, and internal reporting. At the same time, governance is becoming more important. GPs are beginning to adopt responsible AI frameworks and incorporate AI-related risks into investment committee materials.

At Adams Street, we are deploying AI tools that draw on more than 50 years of proprietary private markets data to enhance our sourcing, benchmarking, and diligence workflows. By applying natural language processing and predictive analytics to our deep archive of fund, company, and transaction data, we aim to identify patterns and surface insights that support both investment decision-making and long-term partnership development.

While this transformation is still in early innings, the direction is clear: AI is changing what it means to be a modern investment firm. As with their portfolio companies, GPs that embrace the shift — organizationally as well as technologically — will be better positioned to compete in an industry where speed, scale, and insight are increasingly AI-augmented.

Important Considerations: This information (the “Paper”) is provided for educational purposes only and is not investment advice or an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information. Statements in this Paper are made as of the date of this Paper unless stated otherwise, and there is no implication that the information contained herein is correct as of any time subsequent to such date. All information has been obtained from sources believed to be reliable and current, but accuracy cannot be guaranteed. References herein to specific sectors, general partners, companies, or investments are not to be considered a recommendation or solicitation for any such sector, general partner, company, or investment. This Paper is not intended to be relied upon as investment advice as the investment situation of individuals is highly dependent on circumstances, which necessarily differ and are subject to change. The contents herein are not to be construed as legal, business, or tax advice, and individuals should consult their own attorney, business advisor, and tax advisor as to legal, business, and tax advice. Past performance is not a guarantee of future results and there can be no guarantee against a loss, including a complete loss, of capital. Certain information contained herein constitutes “forward-looking statements” that may be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Any forward-looking statements included herein are based on Adams Street’s current opinions, assumptions, expectations, beliefs, intentions, estimates or strategies regarding future events, are subject to risks and uncertainties, and are provided for informational purposes only. Actual and future results and trends could differ materially, positively or negatively, from those described or contemplated in such forward-looking statements. Moreover, actual events are difficult to project and often depend upon factors that are beyond the control of Adams Street. No forward-looking statements contained herein constitute a guarantee, promise, projection, forecast or prediction of, or representation as to, the future and actual events may differ materially. Adams Street neither (i) assumes responsibility for the accuracy or completeness of any forward-looking statements, nor (ii) undertakes any obligation to update or revise any forward-looking statements for any reason after the date hereof. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward-looking statements. Adams Street Partners, LLC is a US investment adviser governed by applicable US laws, which differ from laws in other jurisdictions.