The untapped value of stronger safety management
THE SAFETY IMPERATIVE
Private equity (PE) firms are geared toward accelerating growth and enhancing the value of their investments. Yet the intense focus on results, efficiency, and cost-cutting can comparatively deprioritize an appropriate focus on developing safety management approaches and culture in portfolio companies. This is a strategic blind spot: returns that PE firms and limited partners (LPs) rely on ultimately depend on safe and reliable performance. Too often, safety is regarded as a regulatory necessity or box-ticking initiative, rather than a critical enabler of long-term value.
Put simply: safety equals value. And nowhere is this logic more relevant than in PE. Revisiting safety as a value creator, instead of a cost, opens another avenue to long-term growth.
This Insight explores why safety deserves a more central role, how firms can identify risk factors, and how they can unlock returns by including safety alongside typical PE priorities such as growth, performance, and exit readiness.
SAFETY CHALLENGES IN PE
The importance and focus that PE-backed firms give to safety is highly variable — while some companies navigate ownership without immediate safety consequences, others face challenges that expose hidden risks. The average holding period for PE firms is approximately six years as of 2024; this incentive structure prioritizes short-term gains over long-term resilience. As a result, companies often defer or underfund safety initiatives with longer paybacks, such as culture programs, preventative maintenance, or leadership engagement.
Safety concerns aren’t just theoretical. Empirical studies show that when leverage is high or cash is tight, companies systematically underinvest in safety: injury rates rise under negative cash-flow shocks and fall when cash flows improve. In other words, the very financial pressures common in PE ownership directly influence whether safety strengthens or deteriorates.
This may result in “kicking the can down the road” — avoiding near-term costs for measures that only benefit future owners. Safety failures often have a long fuse, and due diligence may miss latent risks like weak safety culture, outdated procedures, or deferred maintenance. These vulnerabilities often remain invisible well into ownership or even pre-exit, when they can surface as damaging surprises. The risks are further amplified by rushed acquisition timelines, integration pressures, aggressive cost-cutting, and the push to invest substantial available capital. In our experience, overreliance on safety certification is also flawed; even companies with recognized standards in safety management may not engage in high-performing practices.
REPERCUSSIONS: THE CASE FOR SAFETY IN PE
The overall business case for effective safety management is clear: it protects people, performance, and profit. In the US alone, work injuries cost US $176.5 billion in 2023, or about $43,000 per medically consulted injury. These costs silently erode EBITDA and delay exit readiness.
Workplace incidents often lead to regulatory fines, legal liabilities, increased insurance premiums, reputational damage, and operational downtime. These consequences play a crucial part in eroding value and delaying or disrupting exit plans.
This is particularly true in sectors where safety performance is a license to operate — industries like rail, energy, and chemicals, where serious incidents can lead to shutdowns or loss of regulatory approval (see ADL Viewpoint “Securing the Social License”). Poor safety performance increasingly risks LP dissatisfaction, negative ESG (environmental, social, and governance) ratings, and impaired fundraising potential, especially as ESG scrutiny intensifies (safety falls under “social”).
A worker fatality at a portfolio company highlights how quickly value can come under threat. In the aftermath, a key customer raised concerns about the robustness of the company’s safety practices for employees operating in high-risk environments. Considerable effort was needed to demonstrate that appropriate safeguards were in place. Ultimately, the company preserved the relationship — but had the customer chosen to walk away, the impact on the portfolio company’s value could have been significant.
By contrast, studies have shown how proactive safety investments yield measurable returns, which directly impact value (see ADL Viewpoint “Total Cost of Risk”). Robust programs reduce insurance costs, minimize disruptions, improve employee retention, and enhance reputation. These resulting advantages translate into winning tenders, attracting business partners, and building buyer confidence. Strong safety performance signals operational maturity and disciplined leadership to support faster, more profitable exits.
RISK FACTORS
While safety risks exist across all businesses, some portfolio companies and the PE model itself carry heightened exposure. Understanding where these vulnerabilities lie is critical to mitigating loss of value. Certain characteristics of portfolio companies may inherently expose them to safety risks or make safety more challenging for PE firms to govern, including:
Specific characteristics of the PE model can amplify these vulnerabilities, such as:
Recognizing and actively managing these risk factors early, through better diligence, governance, and performance tracking, is essential to protecting value.
HOW TO EFFECTIVELY EMBED SAFETY
Fortunately, embedding safety into the PE model doesn’t demand major investment or a drastic shift from current practice. The real opportunity lies in reframing safety as part of disciplined performance management and operational maturity — the very qualities buyers pay a premium for at exit.
Weaving safety considerations into each stage of the investment lifecycle, from acquisition to exit (see Figure 1), ensures a comprehensive approach that accounts for all possible safety-related challenges.
CONCLUSION
Safety drives PE value creation. It is not a cost center or a distraction but rather a hidden ROI lever for investors. Weak safety performance signals a high-risk investment, while proactive management prevents costly surprises, protects EBITDA, and builds confidence at exit. The smartest investors don’t wait for an incident to sharpen their focus; they integrate safety early and cheaply, treating it as a lever for resilience and competitive advantage.
By Marcus Beard, Kerri McGowan, Maissa Abu Ayash
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