Portfolio company marked down: what to do next, including a records check for the board

What to do after a portfolio company markdown

A markdown is a signal to rebuild the evidence behind the value creation plan, not only to explain the number. In the first board cycle after the mark, the operating partner's job is to separate what changed (multiples, performance, leverage) from what the plan still controls, and then add any lever the original plan ignored.

One of those levers is easy to miss because it sits in the company's systems rather than its P&L: years of operating records that AI developers may want to license. Checking it costs one agenda item and a short screen with the CFO. It is not a rescue plan, and it should never be presented to the investment committee as one.

For software holdings, the SaaSpocalypse guide for PE-backed software companies covers the sector-specific options. This page is the board-level playbook for any marked-down company, whatever its sector.

Why a markdown is the right moment to look at records

Three things happen after a mark that make the records question timely.

• The plan has to find more value from operations. Bain's Global Private Equity Report 2026 puts buyout holding periods at exit at around seven years, up from an average of five to six years in 2010-2021, and notes that a deal that needed 5% EBITDA growth a decade ago now needs about 12% to reach a 2.5x return over five years. A marked-down asset faces that arithmetic with less room.
• Cost programs start cutting systems. Vendor rationalization, seat reductions and tool cancellations are standard post-markdown moves, and each one can delete history that was worth keeping.
• The board is already listing assets. Management is reviewing what the company owns and what could produce cash, so a records item fits the agenda without a separate meeting.

The demand behind the records question comes from AI developers building agents that carry out multi-step work. Training and evaluating those agents needs real tickets, approvals, deal histories and engineering reviews, which live inside companies rather than on the public web. The guide to agentic AI in PE portfolios explains why the same records can be both a cost lever and a licensable asset.

A 90-day timeline after the mark

Run the records item alongside the normal post-markdown work, not after it.

The last row matters most. A records opportunity rarely dies in the boardroom; it dies when a cost project cancels a ticketing or chat tool without exporting it first.

The four-part records check

Run it in one working session with the CFO and whoever owns IT. Every item can be answered from documents the company already holds, and nobody exports or shares a record to answer it.

• Size: did the company reach 50+ full-time employees at peak (contractors excluded)? Peak counts, so a company that has since reduced headcount can still pass. Check payroll history, not today's org chart.
• History: does it have several years of documented operations, including archived or legacy systems that were never deleted?
• Systems: are records spread across email, Slack or Teams, CRM, finance, support, engineering and operations tools? Strong candidates often run 10-15+ systems.
• Rights: did the company create the records itself, do customer contracts and privacy notices allow licensing, and has none of it been licensed for AI training before?

If all four boxes are ticked, confirm one more thing: an authorized sponsor (owner, CEO, CFO or authorized representative) who would consider an exclusive license for an agreed term. A preliminary, non-binding read takes a few minutes in the company fit checker, and the complete baseline sits on the who qualifies page.

How licensing proceeds belong in the revised plan

Model licensing proceeds as one-time cash, never as recurring EBITDA. A license is typically a single payment for an exclusive AI-training license over an agreed term, usually received within about 60 days of invoicing once the buyer selects the data. Putting it into run-rate EBITDA would overstate the recovery and invite the first question any lender or buyer will ask.

On recognition timing, accounting guidance distinguishes a right to use intellectual property as it exists when granted (recognized at a point in time) from a right to access it throughout the license period (recognized over time), as Deloitte's ASC 606 licensing roadmap explains. How a specific data license should be accounted for is a question for the company's auditors. This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Who to involve, and in what order

1. Portfolio CFO: owns the systems list, the payroll history and the customer contract files the check depends on.
2. Company counsel: reviews customer contracts, privacy notices, employee policies and any data-related representations given to lenders.
3. The sponsor at the company: it must be an owner, CEO, CFO or authorized representative, so agree early who that will be; nothing moves without their interest.
4. Deal partner: if an exit is being considered, an exclusive license has to fit the sale timeline and the disclosure schedule.
5. Lender: only if counsel finds a covenant that requires consent.

The guide to CFO priorities in 2026 shows how finance leaders are weighing AI agents, data quality and record keeping this year, which helps when framing the request to the CFO.

A board-memo paragraph you can adapt

Paste this under other value levers in the revised plan memo and edit the bracketed parts.

What to say to the CEO

Keep it factual. Do not quote a price range, a buyer or a date for proceeds: none of those are known until the company completes its inventory and agrees terms.

What to preserve while costs are being cut

Before procurement cancels anything, add these lines to the IT cut list:

• A complete export of every chat, ticketing, CRM and project tool being retired, kept under the company's control.
• Mailboxes and shared drives of departed employees, held under the existing retention policy rather than deleted early.
• Code repositories, pull requests and issue trackers for discontinued products.
• Admin credentials and export documentation for legacy systems, assigned to a named owner who is staying.

If the markdown later turns into a wind-down, the records can still qualify as long as they exist; the resource on licensing data from a wound-down company covers that path.

When to leave it off the agenda

Skip the item, or revisit it at a later trigger, if:

• Most records belong to the company's clients, as at agencies and outsourcers, and those clients have not consented.
• The data is mainly consumer personal information, or protected health information without authorization or de-identification.
• Archives were deleted or nobody can run exports.
• The owner would not consider an exclusive license.
• A sale process is in its final weeks and a new contract would complicate signing.

How partner rewards work if you make the introduction

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company. Rewards become payable only after the buyer pays and SourceX receives its fee; an introduction, meeting or signed agreement alone does not trigger payment, and no reward is guaranteed. The reward is a share of SourceX's fee and is never deducted from what the company receives. Check your firm's policy on fees connected to portfolio companies before registering; the page for private equity operating partners covers that role in more depth.

Next step

Put the records item on the next board agenda and run the four-part check with the CFO. If the company passes, register as a partner and make the introduction, or have the CEO apply at sourcex.si/apply through your referral link.