Sell Your Company Outright or Recapitalize: Which Is Right For You?

Many business owners who are considering retirement aren’t quite ready to exit their companies altogether. A recapitalization is often an ideal alternative, especially for those who would like to reduce the amount of personal wealth they have tied up in their business. In a typical recapitalization, a private equity group purchases a portion of a company, which can help you, as the business owner:

Take some ‘chips off the table’

The owner receives cash at closing for selling a portion of their business. By taking some of your personal wealth out of your company, you can diversify your net worth.

Retain ownership

As a partial owner, you maintain a financial stake in the company, meaning you benefit as your business grows. You may even be able to pursue more aggressive growth opportunities because you have less of your personal wealth tied up in the company.

Stay involved in the company’s management

Some business owners wish to continue managing their business on a full-time basis, while others choose to split their time between their business and other personal interests. Every transaction is unique and can be crafted to meet the needs of the owner and the company.

Obtain additional financial resources

Your new business partners may be able to provide the financial and operational resources needed to help you accomplish certain goals that were once unachievable. The infusion of equity will help you pursue new growth opportunities, potentially increasing the value of your remaining stake in the company.

Cash out twice

Owners who complete a full sale of their company are paid based on the value of their company at the time of the transaction. Owners who pursue a recapitalization are paid not only once when the new investors purchase a portion of the company, but also a second time when they sell the remaining portion (ideally when the business has increased in value). This often results in the owner receiving more than if they had originally sold 100% of their company.

Sustain your legacy

Owners have carefully built their company’s image and culture over years of hard work. By maintaining some degree of control in your company, you can ensure this stays intact as the company grows.

A recapitalization may not be the best option for every business owner, but it could be an ideal alternative for those who are not quite ready to hand over full control of their company. If you are considering a recapitalization, an experienced M&A advisor can help you:

Attract multiple offers from qualified investors

Some M&A advisors have large databases of private equity firms that are continuously searching for new investment opportunities. A skilled advisor should be able to coordinate a confidential process that is designed to draw interest in your company from many of these investors.

Create negotiating leverage

By working to generate offers from multiple investors, your M&A advisor can provide you with negotiating leverage to help you achieve maximum value for your company.

Choose the best investor for your business

In a recapitalization, the ideal investor will promote long-term company growth, possess good chemistry with you and your management team, and offer the best possible price for a stake in your company. By meeting with several interested private equity groups, you will be able to evaluate each of their unique strengths and assess your level of chemistry with each firm. An M&A advisor can help you determine which investor would be the best fit for your company.


This document is for informational use only and may be outdated and/or no longer applicable. Nothing in this publication is intended to constitute legal, tax, or investment advice. There is no guarantee that any claims made will come to pass. The information contained herein has been obtained from sources believed to be reliable, but Mariner Capital Advisors does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.