The answer to this question does not have to an absolute “yes” or “no” response. By considering a private equity recapitalization, a vast menu of sale and liquidity options become available depending on your age, desire to remain involved with the business, vision for the business, and liquidity requirements. Simply put, a partial sale of the business to a private equity buyer (a recapitalization) can accomplish many of your objectives without selling 100% – achieving some liquidity today, providing a path to additional liquidity on a future sale, and securing a deep-pocketed partner that is committed to growing the business. Equity recapitalization transactions enable our clients to largely cash out of their investment in the business (normally 75-80%) and capitalize on the enormous amount of sweat equity they have put into their business over the years.
An equity recapitalization represents an alternative to a complete sale of a company. The original owner can continue as a partner and/or manager of the company, while the new partner is a private equity firm that shares the business owner’s culture and vision for the future. Unlike some strategic acquirers who purchase with a view towards eliminating overhead redundancies, private equity firms prefer a more passive or board level involvement and a collaborative relationship with the existing owner and management. As partners, these private equity firms are able to bring strategic opportunities to the company that were not previously available, and can provide strategic management experience in order to assist the company to its next level of growth.
Today, there are over 4,480 private equity groups with committed funds. These groups distinguish themselves in a variety of ways, but they all share the common goal of investing in and growing privately held companies. Most private equity groups have clearly defined characteristics they are seeking in businesses: size (revenue and/or EBITDA), industry, geography, and owner/shareholder objectives, among others. Matrix maintains close relationships with hundreds of these groups and has extensive experience in identifying the appropriate private equity buyers to include in an equity recapitalization process, depending on the business owner’s transaction goals.