How do private equity firms value portfolio companies?

Full Explanation

Private equity valuation combines several approaches. The most common is the comparable company or precedent transaction method, applying EBITDA multiples from similar deals. DCF analysis models future free cash flows and discounts them at the weighted average cost of capital (WACC). For growth-stage companies, revenue multiples may be used instead. Post-acquisition, PE firms conduct purchase price allocation (PPA) to identify and value all intangible assets for financial reporting. This is increasingly important for demonstrating value creation during the hold period — showing that customer relationships have deepened, technology has improved, and brand value has grown provides evidence for a higher exit multiple. Opagio's Investor Platform gives PE firms portfolio-wide visibility of intangible asset health, benchmarked across sectors, with exit-ready valuation reports that document value creation through the ownership period. For private equity firms, intangible asset analysis is particularly valuable during the value creation phase of portfolio ownership. Identifying which intangible assets can be developed, protected, or monetised during the hold period enables more targeted operational improvement programmes. Similarly, understanding which intangible assets are at risk — key person dependencies, expiring contracts, or unprotected intellectual property — helps portfolio managers prioritise risk mitigation. Opagio's platform provides a structured framework for conducting this analysis across portfolio companies.

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