There are many Exit Strategies to choose from, but there is one Exit Strategy for business owners that is often ignored when creating an Exit Plan. It is called a recapitalization.
Recapitalizations are usually structured in such a way that a private equity group or some other institution invests cash in return for a chunk of equity in the company. These private equity groups look for a return on their investment through appreciation in the value of the company over time. They are not usually interested in managing the company on a day-to-day basis.
This Exit Strategy will allow the owner to take some “chips off the table” in order to fund retirement; or create liquidity for such reasons as gifting to nonworking family members or for estate planning purposes. We have also used recapitalizations to buyout shareholders as well as to fund growth or make acquisitions. We have even utilized this exit strategy to transfer a business interest to the next generation of family members or to key employees.
A recapitalization is an ideal Exit Strategy for a business owner who wishes to sell a portion of his or her company. The owner can convert a large portion of his or her equity into cash at closing. Over the long term, the owner or his or her successors can create retain a significant equity stake and participate in the future upside of the company.
We work with a number of sources of equity for recapitalizations.
