Equity Recapitalizations

The Experts at Raincatcher are Here to Help

Many of Raincatcher’s Partners and Mergers and acquisitions (M&A) advisors come from backgrounds as middle market consultants, accountants, and investment bankers.

We aim to bring a middle market team and skillset down to the lower middle market to execute recapitalization and M&A, where it has historically been less available.

Raincatcher partners and M&A advisors come from successful careers as investment bankers, Big 4 accountants and consultants and as small business owners.

We provide investment banking services to assist founder and family-owned companies in maximizing their business value and capabilities. If you are looking to raise capital or sell your business, we welcome you to send us a message to get introduced.

What a Equity Recapitalizations Can Do For Your Business

Equity recapitalizations benefit private market companies with $2m+ in adjusted EBITDA in various scenarios. This financial strategy involves selling a portion of the business for cash in the form of equity. An equity recap differs from a debt recap in that the check is not debt going on the companies balance sheet, it is an investor buying stock (or partnership units) in the company.

For mature companies, equity recaps address liquidity needs, allowing partial value realization without a complete exit. Secondly, businesses focused on robust growth leverage equity recaps to access capital for strategic initiatives such as bolt-on acquisitions, R&D initiatives or market expansion. Additionally, companies burdened by high debt levels may opt to use an equity recapitalization to improve the financial health of the company’s balance sheet by paying off some of the debt.

Ownership diversification is another element to why lower middle-market companies may opt for an equity recapitalization. Equity recaps introduce new investors (either minority or majority) expertise, and perspectives, contributing to overall company resilience and hopefully growth.

Lastly, these transactions play a pivotal role in succession planning by offering a way for founders or owners to diversify their personal and family net worth while ensuring continuity and business growth.

How an Investment Bank Orchestrates Equity Recapitalizations

Lower middle-market companies with adjusted EBITDA of $4 million or above are particularly well-suited for equity recapitalizations. While it is do-able for smaller companies, recaps of larger companies are more common and complete exit of smaller companies have become the norm.

Investing in a company solely with an equity check as opposed to with equity and debt is especially effective for businesses operating at this scale. It’s worth noting that investors traditionally prefer to use some debt in their acquisitions. In instances such as 100% equity recaps where no debt is utilized, there is often a trade-off as investors may opt for slightly lower valuations.

One of the main benefits of a recapitalization is that the company can achieve partial value realization without a complete exit, offering existing owners a strategic means to unlock value. Additionally, for businesses focused on robust growth, equity recaps become instrumental in accessing capital for strategic initiatives such as acquisitions, market expansion, or research and development and are seen as a safer way to finance the business than an acquisition using some debt financing.

The Raincatcher M&A Process at a Glance

Equity Recapitalizations Process and Service

How We Work With Our Equity Recapitalizations Clients

Thesis Development

Our clients typically come to us with an array of desired outcomes in mind. Once we are able to get a better understanding of your company and what you’re looking to accomplish, we can give guidance on what you can expect from the market and help guide you on that process.

Get introduced to Raincatcher to see if some of our investment banking services could be a fit for your company.

Specially designed investment banking process

Whether we are working with clients on their buy-side or sell-side M&A, or an equity or debt recapitalization, there are similarities in our approach.

We believe that the through preparation of a data room and investor materials is crucial in achieving the desired outcome and in giving our clients the most offers to look through. 

This process, as well as the caliber of the team executing it is the primary difference between a business broker and an investment bank.

Short-listing prospective partners

Whether we are targetting private equity groups, banks or private money lenders or solely focused on strategic buyers, we tailor a prospect list to each client to make sure that we are getting the business in front of the proper group of debt and equity investors.

Gather bids, negotiate terms and facilitate diligence

Once IOI’s have been received from potential debt and equity investors, we work with our client to short-list the most capable firms and share more information with them ahead of their LOI.

Once they submit an LOI, we negotiate those deals extensively before one is signed and due diligence commences.

Next Steps for Your Equity Recapitalizations

If you are looking for a partner and for capital to continue scaling your rapidly growing business, an equity recap or other growth equity capital may be a good option.

What Our M&A Clients Have to Say

Request A Consultation

If you’re a business owner and you are currently looking for growth capital, buying out a partner or investor, or taking on an investment partner; we welcome the opportunity to get introduced to discuss our specialized debt and equity recapitalization process and services.