More and more business owners are taking advantage of a financial tool known as a recapitalization or “recap,” for short. Could a recap work for you?
One of the advantages of a recap is that it allows the owner to take a sizeable chunk of money off the table at today’s low capital gains rate and still take advantage of the continued growth of the company into the future.
A recapitalization is basically a partial sale of a company, whether it is a minority or majority stake. A large number of private equity funds are currently looking for companies to invest in—so much so that there are now funds that specialize by industry, by minority or majority (control) stakes, as well as numerous other investment subsets.
One of the advantages of a recap is that it allows the owner to take a sizeable chunk of money off the table at today’s low capital gains rate and still take advantage of the continued growth of the company into the future. This is especially true of companies or owners that view today as too soon to sell, but who also realize that having 98 percent of one’s net worth in a single asset does not always make good investment sense, as retirement is on the short-term horizon. A recap allows the owner to continue to run his or her business, receive a salary and benefits, and capture the additional equity growth the company can obtain. Outside investors bring a depth of experience and work with the owner to better position the company for its eventual sale sometime in the future.
If you are interested in discussing whether a recapitalization might be the right opportunity for you, please contact either Tom Kintis (tkintis@cgkib.com) or Tony Alongi (aalongi@cgkib.com) at 262-522-8220.