Private Equity Recapitalization — Taking Some Chips Off the Table

Any business owner, whether young or old, has investigated a succession plan or at least wrestled with the idea of selling their business. Sometimes this can happen during a period where significant growth lies ahead, or in times when economics look bleak. What business owners often overlook is the alternative financial technique known as a private equity recapitalization (recap). A recap is where business owners can sell a portion of their business to Private Equity (PE) firm/partner. This gives them a cash reward, whilst still giving them the benefit of forecasted growth, or a turnaround in the economy. More so, PE firms not only provide capital they can add value as a business partner. This additional benefit can come in the form of industry, operational and organizational expertise; all used to increase the value of your business. How a PE recap works It is hard to explain this with text, so let’s work through a simple fictional example. Sam founded Widget Co., a…

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