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Minority Recapitalization Overview

A compelling transaction option for owners who wish to continue to maintain control of a growing business

 

What is a minority recapitalization?

A “recapitalization” shifts the mix of debt, equity, and ownership

A minority recapitalization (minority “recap”) is a type of investment in which NB Group provides debt and equity capital in exchange for a 20-49% ownership stake in a company.

The capital can be used for shareholder liquidity and/or growth initiatives.

This type of investment can be an attractive alternative to a majority or full sale of a company which allows business owners to realize similar levels of cash proceeds but retain control of the business and achieve similar objectives.

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A minority recap can provide business owners an attractive combination of cash proceeds, on-going ownership, and control as illustrated in the example below.

In each scenario above, NB Group invests both debt and equity, which is used provide cash to shareholders and repay existing debt

In a 49% minority recap, shareholders receive $17.4m versus $22.0m in the 80% sale. So shareholders receive only 25% less cash than they do in a 80% sale, but get to retain 51% ownership and control.

When does a minority recap make sense?

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Above are example scenarios, but every situation is different. NB Group is highly flexible and works patiently with business owners to design a transaction structure that achieves their goals.

We welcome an exploratory discussion about investment options for your business.

Please contact us at partners@nbgroup.us or (646) 854-1868 to discuss further.