In some ways, a minority recapitalisation gives businesses the best of both worlds; providing companies with capital that can be used to meet their growth objectives, while still enabling active shareholders to stay in control.
The above infographic illustrates the various uses of funds raised from a minority recapitalisation. A minority recapitalisation, also known as a “minority buyout”, is an alternative means of raising capital to generate liquidity. In a minority recapitalisation, leverage in the form of senior debt, mezzanine financing and/or preferred equity can be provided to an existing, positive cash-flow generating business.
Financing from a minority recapitalisation can be used for a variety of capital needs, while allowing the active shareholders to retain majority control of the business, as opposed to a majority recapitalisation or outright sale of the business. The company’s future cash flow is then used to repay indebtedness in subsequent years.
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