The Benefit of Being a Portfolio Company

22 Nov

Portfolio companies are common among large corporations. Basically, being a portfolio company means that a larger corporation—generally a private equity firm—has chosen to invest in or back your company financially. These firms often choose to invest in companies that are struggling financially, but that they see as having a large growth potential.

 

By purchasing a majority of a company’s stock, venture capital firms, buyout firms, and holding companies gain significant control within a company, often placing knowledgeable executives on a company’s board. This allows them to reorganize, improve operational efficiency, maximize revenues, and turn a company from being on its way out toward success.

 

KKR is one of the U.S.’s major private equity firms, and it specializes in doing just that. Dean B. Nelson is part of KKR’s leadership team, and is founder and head of KKR Capstone. This program is a partnership between KKR and its portfolio companies, and its goal is to help improve functional operations within a company.

 

Companies that become portfolio companies can benefit greatly from the expertise and mentorship that a much larger private equity firm can offer. Whereas before a company might have been struggling, a buyout’s eventual goal is to come in and solve existing problems to help the company reach its fullest potential.

 

Being a portfolio company also connects you with other portfolio companies. Networking potential goes up significantly, and the opportunity for growth is huge. It’s a big turnaround from being a struggling company on its way out to seeing growth and profitability once more.

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