Private Equity Portfolio Company Valuation
29 valuation methods · 43 industries · Results in under 10 minutes
In short
A private equity portfolio company is valued on the model for its own industry, the one a buyer in that industry would use, after the add-backs you confirm and with net debt subtracted to reach the fund's equity. Most companies take a discounted cash flow, comparable companies and precedent transactions.
Who this is for
Private equity sponsors, independent sponsors and family offices valuing portfolio companies for quarterly marks, add-on screening, refinancing or exit planning, and operating partners who want each company read the way a buyer in its industry would read it.
How is a portfolio company valued?
VA values each portfolio company on the model for its own industry, because that is how a buyer in that industry will price it: a discounted cash flow, comparable companies and precedent transactions for most companies, and dedicated models where an industry needs one, such as payer mix for a clinic group, tangible book for a bank or lender, or debt capacity for a contracted power project. Earnings are taken after the add-backs you confirm, net debt is subtracted to reach equity, and the portfolio view in the app tracks each holding and how its value changes. This tool is informational only. Output is driven by your inputs and does not constitute a formal appraisal or certified valuation.
What drives the value of a portfolio company?
- Earnings growth since entry, and how much of it is organic
- Add-backs a buyer will accept, and those they will not
- Net debt, and how fast it is coming down
- Revenue quality: recurring share, retention and customer concentration
- A management team that stays through a sale
- The buyers for the exit, and what they pay in the company's industry
What lowers the value of a portfolio company?
- Marks that lean on add-backs a buyer will not accept
- Growth bought through acquisitions rather than earned
- Debt that is not coming down
- A management team that may not stay through an exit
How much is a portfolio company worth? A worked example
A portfolio company, by discounted cash flow
Take a portfolio company with $20 M of revenue and a 15% EBITDA margin, or $3 M of EBITDA. Assume revenue grows 6% a year for five years, capital spending and depreciation each run at 3% of revenue, working capital takes 10% of each year's added revenue and tax is 25%. Cash flows are discounted at 18%, the lowest rate VA uses for a company this size, with 2.5% growth after year five. VA's discounted cash flow gives about $12.7 M before debt, or 4.2× EBITDA. With revenue growing 2% a year instead, as when an add-on stalls, it comes to about $11.4 M. In a full report, each method's weight follows the company's industry, as its industry guide explains.
Illustrative figures from VA's discounted cash flow alone, on the assumptions stated. A full report blends it with the industry's other methods, such as comparable companies and precedent transactions.
Value your portfolio company in under 10 minutes
- 1.Upload your financial statements, or type the figures in.
- 2.Confirm the add-backs and the industry details the model asks for.
- 3.Get a valuation range, the methods behind it and a PDF memorandum.
Which numbers matter most?
Normalized EBITDA
EBITDA after the add-backs you confirm. It is the figure buyers price, so add-backs a buyer will not accept should stay out.
Net debt
Debt less cash. It is subtracted from enterprise value to reach the equity the fund owns.
Organic growth
Growth from the business itself, apart from acquisitions. Buyers pay more for it than for growth that was bought.
Recurring revenue share
The part of revenue that repeats under contract or subscription. It makes the cash flow a buyer pays for more reliable.
Customer concentration
The share of revenue from the largest customers. Heavy concentration lowers what buyers pay in every industry.
What do you need to value a portfolio company?
- Profit and loss statements and balance sheets, ideally for the last three years
- Figures for the current year to date
- A list of add-backs: the owner's pay and perks, and any one-off costs
- Loan and lease balances
- Statements with the add-backs you propose, and their support
- Net debt and the debt schedule
- The budget and plan the value creation rests on
Example scenarios
An add-on that stalls
An acquisition meant to lift growth underdelivers, and the plan slows. The worked example shows what slower growth does to the discounted cash flow.
Add-backs a buyer rejects
The marks lean on add-backs a buyer will not accept. The model values the earnings after the add-backs you confirm, so confirming only defensible ones keeps the mark close to what a buyer would pay.
Further reading
Business Valuation Methods Explained: DCF vs. Comps vs. Precedent Transactions
The five business valuation methods professionals actually use (DCF, comparable companies, precedent transactions, SDE/EBITDA multiples, and asset-based), when each wins, and how they combine into one defensible number.
WACC Explained: Why Your Discount Rate Can Make or Break a Valuation
WACC is one of the most misunderstood terms in business valuation. Here's what it is, why it matters, and how it directly affects what your business is worth.
DCF Analysis Explained for Private Companies
A clear, practical guide to discounted cash flow analysis for private companies. Learn the five key steps, how to estimate WACC without public market data, terminal value approaches, and common pitfalls to avoid.
Frequently asked questions
How does VA value a portfolio company?
On the model for its industry, the same one a buyer in that industry would use, after the add-backs you confirm and with net debt subtracted to reach equity.
Can I use this for quarterly marks?
As a consistent, documented starting point, yes. Fair value marks for reporting to investors follow the fund's valuation policy and accounting standards, and are often reviewed by an independent valuation firm.
How does paying down debt affect the value?
Enterprise value less net debt is the equity. As debt is paid down, the equity rises even when the business's value is flat.
Does VA use the multiple we paid at entry?
No. It values the company as it stands today on its industry's model, so the result can be compared with the entry price rather than anchored to it.
Can I track the whole portfolio together?
Yes. The portfolio view in the app lists each holding with its latest valuation and how it has changed.
Is this a certified appraisal?
No. This is an informational estimate driven by your inputs. Formal valuations for investor reporting require the fund's own process and, often, an independent valuation firm.
Terms used on this page
- Normalized EBITDA
- EBITDA after add-backs, so it shows what the business earns in a normal year under a new owner.
- Add-backs
- Costs added back to reported earnings because a new owner would not bear them: personal expenses run through the business, one-off costs, or owner pay above what the role would cost to fill.
- Discounted cash flow (DCF)
- A valuation that projects the cash a business will generate over the coming years and discounts it to today at a rate that reflects the risk of receiving it.
- Discount rate
- The yearly return a buyer requires for the risk of owning the business. A higher rate lowers what future cash is worth today.
- Comparable companies
- A method that values a business at the multiples of earnings or revenue at which similar companies are valued.
- Precedent transactions
- A method that values a business at the multiples paid in past sales of similar companies.
As featured in
Value your portfolio company
Get a valuation range with the methods behind it and a PDF memorandum in under 10 minutes.
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Last reviewed September 26, 2026 against VA's valuation models.