Why International Expansion Is PE Tech's Most Under-Pursued Growth Lever

Classic private equity (PE) value-creation tactics like leverage, multiple expansion, and margin improvement on efficient businesses are not as effective as they once were. Today, revenue growth accounts for over 70% of PE exit value creation. For PE-backed technology companies, the most powerful source of revenue growth is often international expansion. 

In our experience working with North American PE-backed technology businesses entering Europe and Asia, structured expansion can deliver revenue growth of roughly five times per focus country within three years, a return on incremental investment of three to seven times per annum, and a net contribution margin of approximately 10% by year three. Geographically diversified revenue also strengthens the exit narrative, broadening the buyer universe and supporting materially higher multiples.

However, we've also observed successful North American tech businesses, often in software, cybersecurity, infrastructure, and other adjacent categories, that hold a 40% to 50% share in their home markets and achieve single-digit market penetration when expanding into European or Asian markets. This is largely due to a poorly planned go-to-market (GTM) international growth strategy.

Why PE often hesitates on international expansion

In our work with PE-backed companies, we've observed reticence toward international growth for the following reasons:  

• Domestic optimizations feel "safer" than expanding abroad: familiar customers, known dynamics, and near-term visibility.
• International scaling is often seen as expensive, slow, and difficult to govern from a distance.
• Payback that's measured in years, not quarters, cuts against short-term EBITDA incentives.
• Cultural, operational, and geographic distance makes expansion easy to defer and complicated to champion internally.

Each of these reservations is legitimate. None is a reason to avoid international expansion; it should simply be approached differently. 

Why international programs can underperform

When internationalization underperforms, however, the causes tend to be structural and consistent. They include: 

• Companies export domestic playbooks into vastly different sales environments.
• "Europe" or "Asia" are often treated as single markets rather than regions with multiple markets, each with distinct regulatory frameworks and channel ecosystems.
  
•  Companies under-develop channel ecosystems and under-resource country teams.
• First-mover advantages are forfeited when entry is delayed and runs into hold-period constraints.
  

  Each barrier is real, but each has a known structural remedy.

Our four-step approach to international expansion

Scaling into international markets is an analytical and organizational process. The approach rests on four steps.

1. Step 1: Disciplined country selection. Deciding which markets to enter and the resources required to enter them is the most critical part of the process. This requires an outside-in market attractiveness and right-to-win assessment that identifies a focused set of priority markets and entry paths, including the choice between organic build and tuck-in acquisition.

2. Step 2: Granular, tangible action plans per market. Once priority markets are selected, the company should draft international action plans that are as granular as its domestic playbooks. This should include named target accounts, identification of channel partners, agreed actions and timelines by customer segment, and unambiguous ownership for each initiative.

3. Step 3: Working alongside country teams. This is what separates programs that deliver from those that stall. Building the attack plan with local sales leaders and channel managers, not designing it for them, is a critical task that ensures the people executing the plan fully own the outcomes.

4. Step 4: Governance, KPIs, and CFO endorsement. This means translating market ambitions into approved budgets, named accountability, and leading-indicator KPIs that surface execution gaps in time to address them.
   

The companies that succeed internationally are not those with the most ambitious plans. They are those with the best-executed ones. 

How Altman Solon can help

Altman Solon supports PE investors and their portfolio companies in making strategic, commercial, and operational decisions as they scale technology businesses internationally, from pre-deal market assessment through post-investment program execution. Our relevant capabilities include: 

• International market attractiveness and right-to-win assessment: Outside-in market landscaping and competitive positioning analysis across global markets, identifying priority focus countries and sequenced entry options.
• Commercial due diligence with an international growth lens: Integrating market sizing, competitive analysis, and channel ecosystem assessment into our commercial due diligence, stress-testing growth assumptions and surfacing operational requirements.
• Go-to-market design and country-team activation: Designing and operationalizing granular market entry plans alongside in-country sales, channel, and marketing teams, through our go-to-market practice.
• Tuck-in target identification and integration support: Identifying and screening tuck-in targets in priority markets, conducting commercial assessments of shortlisted candidates, and supporting integration through our M&A practice.