Mergers & Acquisitions Advisory

Sell Side Transactions
Buy Side Transactions
Leveraged and Management Buyouts
Going Public Transactions
Going Private (Public to Private) Transactions
Recapitalizations

Recapitalizations
A recapitalization is a transaction in which a company reallocates, or restructures its balance sheet. A company may recapitalize its mixture of debt and equity to make its capital structure more stable, raise growth capital, or improve liquidity. Recapitalizations are also very common amongst business owners who want to take capital out of their company. In either scenario, an equity sponsor (typically a private equity firm or hedge fund) will exchange cash for the stock of the company.

The “Cash Out” Scenario
For many business owners, their personal wealth is locked into the equity of their company, in addition to the risk of liabilities such as personal guarantees on debt. Recapitalizing the balance sheet unlocks the value of the owner’s equity by creating substantial liquidity of their personal net worth. The owner often has the option of retaining an equity interest and remaining involved in the company’s operations, or exiting the company completely. If the owner decides to stay with the recapitalized company, he or she may have the opportunity to receive a “second bite of the apple” when the company is later sold by the equity sponsor.

The owner’s continuing involvement in the business makes recapitalizations of great interest for the equity sponsor. Each private equity firm has its own formula for investment, but in general, they seek companies with consistent revenue and earnings growth, a significant market share or niche position, experienced management, and an adequate plan for future growth.

How Atlantic American Can Help
A recapitalization is a very involved process and requires a significant amount of time and resources. In addition, it is very important to select the right equity sponsor and make sure that their interests are closely aligned with the business owner’s.

Atlantic American can assist in identifying and marketing to the most appropriate equity sponsors within, as well as outside, of our extensive network of private equity firms and hedge funds. We can assist owners to position their company to obtain the highest possible valuation in order to maximize the amounts of cash received and capital retained.