MINORITY SALE AND RECAPITALIZATION OF THE BUSINESS
by Sergio Garcia del Bosque, Executive Director, Seale & Associates
It does not always make much sense to sell most of the shares of a business. Sometimes a minority sale and recapitalization of the business meets the objectives sought by the company and its shareholders including diversification, liquidity and financing the growth of the company.
In a minority sale and recapitalization of the business, it seeks to offer liquidity to the shareholders, allowing them to maintain their controlling interest in the company. In addition, financing and an optimal capital structure can be obtained to facilitate the company’s growth plans.
What is a minority sale and recapitalization?
It is the obtaining of capital that can be used for the company’s liquidity and / or shareholders, initiatives (organic or acquisitions) of growth of the company, or a combination of the two, in exchange for a minority participation of the company.
The transaction combines debt and capital to minimize the dilution of current shareholders and improve the capital structure of the company.
Why choose a minority sale and recapitalization?
A minority sale and recapitalization is convenient for the entrepreneur who seeks growth of his company, without renouncing the majority of his participation. In the same way it can be useful when several owners have different goals. For example, a retired or inactive owner may seek liquidity, while other members of the family are still working to grow the company.
Structure of the investment
In a minority sale and recapitalization of the business, a combination of capital sources that dilute the shareholders of a company is used less than when obtaining a simple loan.
These investments seek to use a combination of guaranteed debt with assets, guaranteed debt with cash flow and preferred shares.