Realize significant value while actively involved

STRATEGIC RECAPitalization

• Chuck has worked with business owners who want to achieve portfolio diversity while maintaining an active, ongoing role in expanding their businesses. A strategic recap provides the opportunity for an owner to extract a significant portion of value locked in a business. 
• Potential benefits of strategic recap’s for a business owner include: financial liquidity and diversification, tax-advantaged extraction of value (via cap gains vs. ordinary income tax rates), removal of personal guarantees, greater access to expansion capital, expanded bonding capacity, platform for generational transition, benefit of scale and related potential equity accretion associated with being part of a larger entity. 
• In a strategic recap, the business owner and new investors establish a mutually agreed upon valuation of the ongoing business. Then the new investors pay the business owner for a portion of the equity and the business owner maintains an equity interest in the new entity.  
• Going forward post recap, typically the owner continues day-to-day management of the business, while the investor provides administrative and business development support and shoulders the responsibility for ongoing capital and operating expenditures.
• Growth can often be accelerated due to access to a greater pool of capital and to an expanded network of prospective customers served by similar firms within the the investor's portfolio of businesses.
• Equity-driven strategic recap's are most applicable in businesses that are highly dependent upon personal (vs. long-term, contracted) relationships and in which active owner-involvement is integral for effective management transition.