Rising valuations and financial engineering did a large share of the work in a buyout for most of the last decade. That support has weakened, and returns now depend more on how portfolio companies perform across a longer hold.
For many software companies, cloud cost optimization is one of the few margin levers that private equity owners and management can influence directly.
The figures below come from Bain, McKinsey, Gain.pro, the FinOps Foundation and AWS documentation.
The short answer: Top-line growth remains the primary driver of returns, though for technology-led businesses where cloud represents a significant cost base, cloud optimization is one of the fastest paths to margin expansion. The challenge is managing lock-in risk: the deepest discounts require long-term commitments that can limit agility as business needs shift over the hold.
Why EBITDA growth now carries returns
McKinsey’s Global Private Markets Report 2026 says leverage and multiple expansion accounted for 59% of private equity returns between 2010 and 2022.
Bain doesn’t expect easy multiple expansion to return soon, and it finds that a typical deal now needs average EBITDA growth of around 10% to 12% a year to reach the same 2.5x return over five years. Bain calls this “12 is the new 5,” and it means more of the return has to come from how the business runs.
10% to 12%: average annual EBITDA growth a typical deal now needs to reach a 2.5x return over five years.
Source: Bain & Company, Global Private Equity Report 2026
Longer holds stretch the timeline for every saving
In Europe, the median company exiting in 2025 had been held for 5.7 years, up from 4.7 years in 2020, according to Gain.pro. Globally, McKinsey puts the average at 6.6 years for 2025, against 6.1 years across 2011 to 2020, with a record 52% of buyout-backed companies now held for four years or longer.
52%: Share of buyout-backed companies held for four years or longer, the highest on record.
Source: McKinsey & Company, Global Private Markets Report 2026
Ad hoc cost-saving exercises don't sustain margin expansion on their own. The real value comes from active management, ensuring the business keeps optimizing as commitments expire and operational needs shift.
Margin is the lever management controls most directly
Gain.pro’s analysis splits PE value creation into revenue growth (54%), multiple expansion (32%) and margin expansion (14%). Studies slice returns in different ways, so these shares don’t map onto McKinsey’s 59% figure above.
Margin is the smallest of the three, but revenue growth depends on the market and on execution, and multiple expansion depends on when the exit happens. Management has far more say over margin than over either of those, provided someone owns it.
AI is growing cloud costs, and the teams managing them are small
In the FinOps Foundation’s State of FinOps 2026 survey, 98% of respondents said they manage AI spend, up from 63% in 2025 and 31% two years earlier.
The teams doing this work are small. Organizations spending more than $100 million a year on cloud have FinOps teams that average 8 to 10 practitioners, plus 3 to 10 contractors. A portfolio company with a smaller bill will typically have an even smaller FinOps team.
8 to 10 practitioners: average FinOps team size at organizations spending more than $100 million a year on cloud, plus 3 to 10 contractors.
Source: FinOps Foundation, State of FinOps 2026
Capturing AWS commitment discounts takes ongoing management
AWS documents discounts of up to 72% off On-Demand rates for EC2 Instance Savings Plans and Standard Reserved Instances, and up to 66% for Compute Savings Plans.
The 72% figure applies to the least flexible options: EC2 Instance Savings Plans, which tie the commitment to a specific instance family in one Region, and Standard Reserved Instances, which tie it to specific instance configurations.
Because the discounts are published, the effort goes into keeping commitments matched to usage as workloads move. A commitment that fit last quarter's usage can sit underused or leave eligible usage uncovered once the architecture changes, and the savings erode.
For more on the trade-off between discount level and flexibility, see Strategic Blue’s guide to the AWS commitment dilemma.
From cloud savings to exit value
Take a company that spends $10 million a year on AWS and sustains a 10% cloud cost saving. EBITDA rises by $1 million a year, and at a 12x multiple that's $12 million of enterprise value at exit.
| Saving as a share of annual AWS spend |
Annual EBITDA uplift |
Enterprise Value at exit (12x) |
| 5% |
$0.5M |
$6M |
| 10% |
$1M |
$12M |
| 15% |
$1.5M |
$18M |
Illustrative example, not a forecast
- $10 million in annual AWS spend.
- A saving measured against total spend that flows fully through to EBITDA.
- A 12x multiple, rounding McKinsey's 11.8x median buyout purchase multiple for 2025, which a buyer may not pay at exit.
- Actual savings depend on usage and on how existing commitments are structured.
Rule of thumb: Every $1 of cloud spend saved each year adds $1 of EBITDA, and roughly $12 of value at a 12x multiple.
What this means for portfolio companies
Cloud cost management belongs in the value-creation plan alongside pricing and procurement, with a named owner, because it impacts EBITDA directly. Done well, it frees both resource and budget: removing the manual work of managing commitments while reducing cloud spend, so teams can focus on product innovation and engineering velocity.
The discount rates are published, so the value is not in finding them: it is in the day-to-day follow-through, forecasting usage and adjusting commitments as workloads change. Over a long hold that is more than a small team can typically absorb, leaving two options: hire more people, or engage a specialist partner to manage it on their behalf.
Strategic Blue is one such partner, helping portfolio companies secure optimal AWS pricing without compromising flexibility. Their approach combines automated analysis with human expertise, including a dedicated FinOps manager proactively identifying new savings as usage evolves.
See where the savings sit
A complimentary Strategic Blue Savings Review projects potential savings and evaluates a portfolio company's current commitment strategy from its AWS cost and usage data. Any single portfolio company can run one, or we can look across a fund.
See the potential savings
Frequently asked questions
What’s the difference between a Savings Plan and a Reserved Instance?
A Savings Plan commits a company to a set amount of compute spend per hour for one or three years, applied across eligible usage. A Reserved Instance commits it to a specific instance configuration over the same terms. The trade-off is flexibility against discount: Compute Savings Plans flex across usage for a smaller discount, while Standard Reserved Instances lock to specific usage for a larger one, suiting steady, predictable workloads.
Does a cloud saving count toward EBITDA?
Yes. A recurring cloud saving reduces cost, and EBITDA captures that reduction wherever the cost is recorded. Finance teams can confirm exactly how it's classified.
Who should own cloud costs in a portfolio company?
A named individual with reach across engineering and finance, such as a FinOps lead or engineering lead. They own coverage, utilization, renewal dates and the usage forecast, so nothing slips between teams.
How often should AWS commitments be reviewed?
Regularly throughout the term. Coverage and utilization shift as usage changes, and each commitment expires on its own date, so checking them against the engineering roadmap before every renewal is a sensible minimum.
How does AI spend fit into cloud cost management?
AI usage is hard to predict because it depends on token consumption and on how quickly teams adopt it. Cost per token also varies by model, so managing AI spend means measuring usage and cost per token for each model, then tracking spend against a forecast of adoption.
How much can a portfolio company save on AWS?
It depends on how much usage is already covered and on the terms of existing commitments, so no single figure fits every company. Strategic Blue's Automate service can cut AWS costs by up to 40%, depending on usage and existing commitments.
Sources