A private company has no ticker and no daily trade to read a price from, so its value has to be built rather than looked up. When the mark on a client's private equity or private credit statement changes, the advisor's job is to explain what moved, and what did not. That explanation starts with understanding how the number is constructed.
How is a private company valued?
Most private holdings with a real operating history are valued using the market approach recognized under FASB ASC 820. A multiple, developed from comparable public companies and completed transactions, is applied to the company's earnings, most often EBITDA. A business with $10 million of EBITDA and a 6.0x multiple carries an implied enterprise value of $60 million. The earnings are a fact about the company. The multiple is a fact about the market.
What does the mark on a client's statement represent?
A mark is that valuation estimate as of a specific date, usually quarter-end. Aggregated across a fund's holdings, it becomes the net asset value shown on a client's statement. It is not a price at which the holding traded that day, and because it is built from two independent inputs, either one can move it.
Can a private company's valuation fall while its earnings grow?
Yes. In the full article's hypothetical example, a portfolio company grows EBITDA 15 percent in a year while the multiple applied to those earnings compresses 20 percent, so enterprise value falls 8 percent. That decline reflects a market re-rating, not weaker operating performance. Multiples move with deal size and credit conditions: GF Data reported an average of 7.0x EBITDA for sub-$100 million platform transactions in 2025, compared with 9.8x for $100 million to $500 million platforms.
What You Will Gain from the Full Article
- A plain-language breakdown of the market, income, and asset approaches under FASB ASC 820, and why the market approach anchors most private equity and private credit valuations.
- How multiples are developed from guideline public companies and completed transactions, and what a multiple actually encodes about growth, risk, and competition.
- How the same mechanic can push loan-to-value higher in private credit even when the loan balance and the borrower's earnings have not deteriorated.
- Four questions to ask before explaining a mark to a client, and how oversight under ASC 820 and SEC Rule 2a-5 shapes the fair value process.
The full article is available in BIP Capital Insights, our free research library for registered investment advisers and their teams. Request access to read the complete analysis, including the illustrative tables, data visuals, and FAQ.
