Private Equity Valuation

Private equity is of increasing importance in the global economy. Private equity firms make investments in early stage companies like Angel Investors , Pre-Seed, Series A,B,C,D,E (called a venture capital investment) to investments in mature companies like Acquisition , Management Buyout(MBO),Leverage Buyout generally in a buyout transaction.

We will use the term portfolio company to denote the companies that private equity firms will invest in. Portfolio companies are sometimes referred to as investee companies. 

We will use the term private equity firm (PE firm) to denote the intermediary Party. We will use the term private equity investor to denote the outside investor who makes an investment in a fund offered by the PE firm.

When we will do the investment, we should examine the perspective of both private equity firms evaluating investments in portfolio companies and the perspective of an outside investor who is evaluating an investment in a private equity firm.

It is commonly believed that PE firms have the ability to add greater value to their portfolio companies than do publicly governed firms.