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What is a Private Equity Recap, and Is It Right for Me?

A private equity recapitalization is a financial acquisition technique primarily used by private equity groups and/or private investors. It allows a business owner to sell a portion of the business, but still retain some equity to take advantage of future growth.

 A private equity recapitalization gives owners the potential to crystallize the value of their retained equity for a second time when the company is sold again by the private equity investor. Private equity recaps are commonly used to fund an expansion of the business or to pay down debt

Private equity groups are savvy business partners who bring more than just capital to the table. They provide industry, operational and organizational expertise that can increase the value of a business.

 Partnering with a private equity firm through a recapitalization allows the business owner to diversify most of their personal risk, while remaining with the company over a longer time horizon.

A private equity recapitalization releases the business owner from carrying personal guarantees on the company’s debt, making this strategy very attractive for owners who are tired of having their personal balance sheet exposed to the company’s ups and downs.

Partnering with private equity groups can also allow for a smoother succession plan because the private equity group is motivated to deepen the management team and reduce the responsibilities of the existing owner.

Most private equity groups are looking to grow the business 15-20% each year for 5-7 years before exiting – allowing the business owner a second “bite of the apple” once that happens.

  • Do you want to take a majority of your chips off the table?
  • Do you still want to work at a reduced capacity and still help grow your business?
  • Do you believe the business still has room for growth and that additional capital with a fresh new partner perspective might help?


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