Fund, manager, and limited partner investment portfolio roll-ups only work if every deal’s value bridge computes — regardless of gains vs losses, levered vs unlevered, and buyout vs growth. The ValueBridge App has you covered.
Video introduction
Guide highlights
Every deal must compute
Value bridges explain how equity gains (and losses) are driven by changes in portfolio company income statements, valuations, and capital structures. For fund, manager, and LP roll-ups to be trustworthy, the math must process every deal — winners and write-offs, buyout and growth, levered and unlevered.
Valuation basis can be Total, EBITDA, or Revenue
When valuation basis is set to Total, value bridges are more generalized to represent deals with both EBITDA multiples and revenue multiples. For example, the “performance” value driver includes both EBITDA growth and revenue growth. Likewise, the “capital structure” value driver includes a combination of changes in the manager’s share of company ownership, positive leverage effect in buyouts, and negative leverage effects in growth equity deals.
EBITDA basis selects mostly buyouts that have positive leverage effect due to debt’s amplification of equity gains (positive gearing) and using company cashflows to pay down debt (positive cashflow generation). Revenue basis selects mostly growth equity deals that can have negative leverage effect due to cash on the balance sheet dampening of equity gains (negative gearing) and burning cash to fund growth initiatives (negative cashflow generation).
Better math for gearing
When the math is right: debt makes equity rise faster than enterprise valuation (positive gearing) and fall faster when enterprise valuation declines (negative gearing). Cash makes equity rise slower than enterprise valuation (dampening) and fall slower when the enterprise is falling (positive gearing on the way down). Value creation models that fail to do this at the portfolio company level cannot be trusted at the fund, manager, and limited partner investment portfolio level.
Check a successful deal
Open a successful deal and confirm that the direction and magnitude of all value drivers make sense with respect to consolidated entry and exit metrics: EBITDA growth and multiple expansion signs match the underlying moves; the leverage effect, gearing, and cashflow generation work as described. Detailed splits (revenue growth, margin expansion, addressable market vs market share, market vs intrinsic multiple expansion, sector and excess gearing) should all check out.
Losers matter too
Strong returns can hide flaws in poorly designed models. Problems show up when MOICs are modest or capital is written off. Building bridges only for “good” deals is not enough to understand aggregate value creation across funds, managers, or limited partner investment portfolios.
Check a failed deal / write-off
On a write-off that loses most of its value, the bridge should remain meaningful and well-behaved: negative EBITDA growth when EBITDA falls; multiple expansion that matches the multiple path; a negative Leverage Effect when enterprise valuation falls with debt still on the books; ownership and market-share effects that match the metrics. Large negative gearing in a highly levered decline is expected — not a bug.
Math that you can trust
Because the App handles these edge scenarios at the portfolio company level — across gains and losses, levered and unlevered, EBITDA multiples and revenue multiples — you can trust roll-ups for funds, managers, and limited partner investment portfolios.
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