BizSugar.com › Raising Capital › Achieving Value Through Majority Recapitalization

Cash Out and Still Have a Piece of the Pie

Recapitalizations can be used to provide liquidity to owners, refinance the balance sheet or fund future growth initiatives. When the owners sell a majority of the business but still retains some ownership, it is termed a majority recapitalization.

When a company grows to become the business owners’ largest asset, there is often a desire to achieve some liquidity by “taking some chips off the table”. When this is the case, an owner may seek to recapitalize the business by selling a portion of the ownership. The proceeds can be used to invest in other stocks, businesses, assets or securities to diversify the sellers’ finances and decrease risk.