Recapitalization

All About Recapitalization

Recapitalization is when a company is restructured and the debt and equity are moved around to help make the capital for the company more stable. When this happens, typically one type of financing is traded for another. This happens often with buying and selling of bonds. This strategy may be employed when we want to help a company improve their financial stability, or to completely change the finances of an organization. One way this is accomplished is to shift the debt to equity ratio of a company. Sometimes the best solution is more debt, but in other cases, it is more equity. It depends on the particular business and what we want to achieve.


There may be a few reasons why we employ this strategy. It could be that the prices of shares are falling or to reduce the financial needs of a company. This is also a strategy when a business may be facing bankruptcy as a way to avoid it.


Growth equity is one of the ways a private equity firm works to create more value and growth from a company. This is a way some established companies can see dramatic growth. Usually this type of investing allows for a large amount of growth for the company, but a minimal amount of risk for the investor. This type of company usually sees growth of more than 10 percent per year and in some cases they see more than 20 percent of growth.