Effective EBITDA Growth Partnership Strategies for Debt Relief

In the current high-rate environment, many middle-market companies face unprecedented challenges, particularly those acquired by private equity managers between 2020 and mid-2023.

These companies now grapple with soaring debt payments, often double or triple the initial amount due to rising interest rates. For those struggling to grow, this financial burden is critical. Prioritizing EBITDA has emerged as a vital strategy for overcoming these challenges.

The Leverage Dilemma

During the 30-month period when PE sponsors acquired these companies, they leveraged large amounts of debt, taking advantage of record-low interest rates. With interest rates unlikely to drop soon, these companies must seek new sources of value or risk credit downgrades or loan defaults. Boosting EBITDA is key to navigating this financial pressure.

Why Focus on EBITDA?

EBITDA provides a clear picture of a company’s health and growth potential, often more accurately than traditional metrics. An EBITDA-centric approach helps companies make strategic decisions that generate new value and cash flow. Increasing EBITDA is crucial, especially as debt burdens consume 60% to 80% of some companies’ profitability.

Strategic Steps to Boost EBITDA

In our recent article by Gary Hoover, VP of Global Private Equity Practice, details essential strategies for Private Equity firms to help their portfolio companies overcome debt challenges brought on by high interest rates.

Increase Output and Reduce Costs: Optimize cost structures and improve operational efficiency, such as renegotiating contracts and integrating automation.
Free Up Working Capital: Better manage cash, accounts receivable, pricing, and inventory to improve cash flow.
Implement S&OP Strategies: Optimizing the inventory management process through demand segmentation is a key aspect of S&OP planning.

The Time to Act is Now

The high-rate environment pressures companies, with PE portfolio companies accounting for 16% of all US bankruptcy filings in 2023. By focusing on driving EBITDA higher, companies can achieve quicker, sustainable results, ensuring they thrive in this challenging landscape.

Complete the form to download our article, “Debt Repellent: How EBITDA Can Help Companies Balance Expenses with Growth,” for quick and actionable strategies to navigate the debt burden.

Frequently Asked Questions

Why is EBITDA growth a critical lever for private‑equity‑backed companies?

EBITDA growth is critical because it provides flexibility to absorb rising expenses without undermining long‑term value creation. The article explains that focusing solely on cost reduction can weaken operations and limit growth potential. By increasing EBITDA through operational improvement, companies can offset inflation, labor cost increases, and other expense pressures while maintaining momentum toward value creation targets.

How does EBITDA growth help companies manage rising operating costs?

EBITDA growth helps manage rising costs by expanding the earnings base rather than simply cutting expenses. The article emphasizes that productivity improvements, better execution, and operational discipline allow companies to generate more output and value with the same resources. This approach enables organizations to balance higher costs without sacrificing service levels, quality, or strategic capability.

What operational actions support sustainable EBITDA growth?

Sustainable EBITDA growth is driven by strengthening execution fundamentals rather than one‑time financial actions. The article highlights improving productivity, stabilizing processes, increasing visibility into performance, and reinforcing disciplined management systems. These operational improvements create repeatable earnings gains that compound over time, helping private‑equity‑backed companies manage expenses while building durable value.