Middle Market Deals and how to buy, sell and raise capital from $5 to $500 million

Recapitalization:  A recapitalization typically refers to a transaction in which the capital structure undergoes a radical change, including transactions that otherwise might feel like a merger or acquisition because it may result in a change of control.

For instance, a private equity firm may invest a sufficient amount of capital in a business to allow the company to purchase shares from exiting owners and executives.  A popular transaction in the last few years has been the private equity investment that allows the entrepreneur to sell some of her own shares to the company or the investor, allowing for the entrepreneur to keep her job and some ownership at the same time she creates some diversification in her portfolio--allowing her to take more risks and grow the business more quickly--potentially recreating the value sold.

Private equity firms have tried to give this style transaction a new name: private IPO.  With apologies to my private equity friends who use the term, I'm not sure that such an oxymoron is likely to better communicate the message than the term recapitalization.

Another form of recapitalization would include an equity investment, again typically from a private equity firm, to reduce debt in an over-leveraged company.

In contrast, a transaction that simply adds more capital to the mix, is not customarily treated as a recapitalization.  The effort to "recapitalize" a business really refers to a big, but not complete, change in ownership of a company.  This excludes a flat out sale of a business as when one company buys or acquires another or any time two companies merge.

By way of reminder, I am eager to post a video clip of businesses and entrepreneurs as a means of helping entrepreneurial companies to increase their market exposure.  I won't promise always to be nice or even to post every clip I get, but I'd sure like to post more.  (For an example, please see my post on HireVue.)  You should also remember, that while I am an investment banker, this blog is intended for educational purposes and should never be treated as investment advice, an offer to sell or a solicitation of an offer to purchase any security.