Digital Transformation & Efficiency Gains: The Cornerstones of 2026 PortCo Budgets

The 2026 Budget Imperative

As we head toward 2026, private equity firms and their portfolio companies are deep in budget-building mode. And one theme keeps rising to the top of every planning discussion: digital transformation and operational efficiency.

The message from across the market is clear — it’s not enough to tighten costs or grow topline revenue. Portcos are investing in smarter systems and tech that unlock both. PwC notes that leading PE-backed companies are “pushing hard on digital transformation to unlock value, increase profits, and speed up exit timelines.” Those holding back risk “falling further behind competitors.”

And the numbers back it up: 72% of PE firms now cite operational improvement as their top strategy for value creation — up from 48% just five years ago. With deal volumes fluctuating and exit timelines stretching, digital transformation has shifted from a “nice-to-have” to a budgetary non-negotiable.

This mindset isn’t unique to PE. Venture-backed and even publicly traded mid-market firms are taking the same tack. In fact, 86% of technology leaders expect bigger IT budgets in 2026 — though with sharper scrutiny on ROI. Amid uncertainty, executives are funding initiatives that both create value and cut waste.

In short: digital transformation isn’t an expense line anymore — it’s a growth strategy.

Why Digital Transformation Tops PE Priorities

Not long ago, value creation in private equity meant cost-cutting, consolidation, and financial engineering. Today, digital technology has rewritten that playbook.

Research from Harvard Business School found that digital initiatives enable portfolio companies to grow the top line and improve productivity — at the same time. That dual impact makes tech investment one of the most powerful levers for value creation in a competitive PE landscape.

One HBS professor summed it up well: “Investing in cutting-edge technologies can make portfolio firms more efficient.”

And the data proves it. A review of 35,000 PE deals showed that companies increased IT budgets by 14% on average after acquisition. Many also added AI and data roles, boosting AI-related hiring by roughly 4%.

Why? Because mid-market portcos often have low-hanging digital fruit — decades of manual processes, disconnected systems, and limited analytics. PE ownership gives them the capital and expertise to modernize fast.

The payoff is measurable: companies that expanded IT spending saw 9% higher sales and 11% higher hiring rates. Those that adopted AI saw an additional 7% sales lift and stronger innovation output.

In other words, digital transformation isn’t just hype — it’s driving real returns.

Proof in Practice: Real Portco Results

The best proof comes from the field. Here are a few examples of portcos and enterprises turning digital investment into tangible gains:

• Manufacturing Efficiency (Mid-Market Portco)
  A PE-backed manufacturer modernized its ERP, automating manual workflows and integrating core processes. The result: 20% lower operational costs and much faster time-to-market for new products. That’s agility and efficiency rolled into one.
• Data-Driven Profit Boost (Industrial Portco)
  A global equipment distributor used AI and analytics to uncover £70 million in new profit opportunities — from better pricing models to smarter logistics. Data clarity directly translated to margin lift.
• Digital Sales Expansion (Large Enterprise)
  A €35 billion industrial company launched a digital sales and delivery platform, adding €1 billion in customer revenue and £200 million in efficiency savings while halving time-to-market. A clear win for both growth and cost control.
• Faster Innovation (Tech Portco)
  A payments company rebuilt its IT architecture around modular cloud tech, enabling product releases 50% faster and cutting security risk by 30%. Tech investment became a catalyst for innovation.

These aren’t isolated stories. According to McKinsey, companies implementing digital initiatives can improve operational efficiency by up to 30% while expanding EBITDA margins. It’s why digital line items are front and center in 2026 budgets.

Where 2026 Budgets Are Focused

Finance leaders aren’t throwing darts at a wall when it comes to digital spending. The most effective portcos are prioritizing initiatives that show clear ROI and accelerate results.

Here’s where smart firms are concentrating their 2026 budgets:

• Tie tech to tangible business outcomes.
  Every investment should support a measurable goal — higher margins, lower cycle times, or faster customer conversion. If a line item can’t tie to a KPI, it’s not ready for the budget.
• Assess your digital maturity first.
  Start with a clear-eyed look at your current systems and gaps. Are you still reconciling manually? Is data siloed across departments? Fix what slows you down before layering in new tools.
• Prioritize quick wins.
  Portcos are favoring projects that deliver results in-year — like automating reporting, deploying RPA for AP/AR, or launching an analytics dashboard. Big transformations start small.
• Invest in data and AI.
  2026 budgets are loaded with analytics and AI line items — data lakes, forecasting algorithms, and team training. Leaders know better data means better decisions.
• Modernize the foundation.
  Cloud migration, ERP modernization, and cybersecurity are eating a larger share of budgets. Legacy systems are too expensive to maintain and too rigid to scale.
• Measure and adapt.
  The best-run companies treat digital budgets as living documents — tracking ROI, reallocating funds to high-performers, and learning fast. The winners experiment, measure, and scale what works.

How Pegasus Helps Portcos Turn Budgets into Results

At Pegasus Insights, we help finance teams turn digital ambition into operational reality.

For many portcos, the challenge isn’t knowing they need transformation — it’s knowing where to start. That’s where we come in.

We help private equity firms and their portfolio CFOs:

• Identify high-impact digital projects with measurable ROI.
• Build the business case and phased roadmap.
• Implement solutions that drive cash visibility, forecasting accuracy, and FP&A automation.

Whether that means upgrading a legacy ERP, integrating bank data for real-time liquidity tracking, or building dashboards that deliver boardroom-ready insights — Pegasus bridges the gap between planning and execution.

Our approach is practical, PE-tested, and ROI-driven. Every recommendation ties back to measurable outcomes — time saved, costs reduced, confidence gained.

Winning in 2026 with Digital-First Budgets

The message for finance leaders is clear: efficiency and digital transformation aren’t competing priorities — they’re the same priority.

As 2026 budgets lock in, the firms investing in data, automation, and scalable systems will pull ahead. Those that delay will face widening performance gaps and tougher boardroom questions.

Digital-first budgeting is both a shield and a sword:

• A shield against volatility — cutting complexity and improving resilience.
• A sword for growth — empowering teams to move faster, smarter, and with confidence.

With the right tools and partners, 2026 can be the year your portfolio reaps the rewards of digital clarity — stronger margins, faster decisions, and a higher enterprise value.

At Pegasus, we’re ready to help you get there.