Portfolio Company

The systematic monitoring and management of a collection of investments. For VC and PE firms, portfolio oversight includes tracking financial performance, productivity metrics, intangible asset development, and strategic milestones across all portfolio companies.

The initial acquisition made by a private equity fund in a particular sector or sub-sector, intended to serve as the foundation for a buy-and-build strategy through subsequent add-on acquisitions. Platform companies are typically larger, more established businesses with strong management teams, scalable infrastructure, and a proven operating model.

A valuation methodology that estimates a company's value by comparing it to similar publicly traded companies using financial ratios such as EV/Revenue or EV/EBITDA. Comps provide a market-based reference point but may undervalue intangible-heavy businesses if peers are not well matched.

An additional return added to the cost of equity to reflect idiosyncratic risks unique to the subject company that are not captured by beta, the equity risk premium, or the size premium. Common factors justifying a specific company risk premium include customer concentration, key person dependence, regulatory exposure, limited product diversification, geographic concentration, and early-stage business risk.

A form of private equity financing provided to early-stage, high-growth potential companies in exchange for equity. VC firms typically invest across multiple rounds (seed through Series C+), provide strategic guidance, and target returns through exits within 5-10 years.

A private equity or venture capital fund that continues to operate beyond its intended life, holding illiquid portfolio companies that have neither achieved exit nor been written off. Zombie funds present governance challenges, carry ongoing management costs, and often reflect unrealised intangible asset potential that has failed to convert into realisable value.

A restructuring of a company's capital structure, typically involving a significant change in the mix of debt and equity, without changing the company's total enterprise value. In private equity, dividend recapitalisations (issuing new debt to fund a special dividend to equity holders) are a common mechanism for returning capital to investors prior to exit.

A private equity transaction in which one PE fund sells a portfolio company to another PE fund, rather than to a strategic buyer or through an IPO. Secondary buyouts have become the most common PE exit route, accounting for over 50% of European PE exits in recent years.

What is a private equity fund and how do they use valuations?

PE funds buy companies at entry multiples, operate them to improve cash flows and competitive position, then exit at higher multiples — valuations are critical for entry/exit decisions.

How does a buy-and-build strategy work?

You acquire a platform business, then add a series of smaller bolt-on acquisitions to it over time, compounding scale and, often, re-rating the enlarged group to a higher multiple than the parts commanded alone.

What are synergies in an acquisition?

Synergies are the additional value created by combining two businesses — cost synergies from removing duplication, and revenue synergies from cross-selling or reaching new markets — that neither would achieve alone.