Recruiter's Glossary

Examples: Equity Value • Harvest Period • EBITDA

Dividend Recapitalization

Term from Private Equity industry explained for recruiters

A Dividend Recapitalization, often called "Dividend Recap," is a financial strategy where a company takes on new debt to pay a special dividend to its private equity owners. It's like taking out a new mortgage on a house you own to get cash out, but for businesses. Private equity firms use this method to get returns on their investment without selling the company. This practice became popular as a way for private equity firms to get money back from their investments while still keeping ownership and control of the successful companies they've invested in.

Examples in Resumes

Led team in executing $500M Dividend Recapitalization for portfolio company

Structured and completed Dividend Recap transaction resulting in $200M payout to investors

Analyzed and implemented Dividend Recapitalization strategy across multiple portfolio companies

Typical job title: "Private Equity Associates"

Also try searching for:

Private Equity Analyst Investment Professional Portfolio Manager Deal Professional Investment Associate Private Equity Principal Investment Director

Where to Find Private Equity Associates

Professional Networks

Industry Resources

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Example Interview Questions

Senior Level Questions

Q: How do you evaluate whether a portfolio company is suitable for a dividend recapitalization?

Expected Answer: Should discuss analyzing company's cash flow, debt capacity, market conditions, and growth needs. Should mention considering debt covenants, interest rates, and impact on company's future flexibility.

Q: What are the risks and benefits of pursuing a dividend recapitalization strategy?

Expected Answer: Should explain balance between returning capital to investors versus maintaining company health, discuss impact on company's debt levels, and mention importance of timing in market cycles.

Mid Level Questions

Q: Walk me through the process of executing a dividend recapitalization.

Expected Answer: Should describe steps from initial company assessment through lender discussions, documentation, and closing. Should mention key stakeholders involved and typical timeline.

Q: How do you model a dividend recapitalization in terms of returns to investors?

Expected Answer: Should explain basic financial modeling concepts, including impact on IRR, money multiple, and consideration of different debt structures and their costs.

Junior Level Questions

Q: What is a dividend recapitalization and why do private equity firms use them?

Expected Answer: Should explain basic concept of taking on debt to pay dividends to owners, and understand this allows PE firms to get returns while maintaining ownership.

Q: What are the main sources of financing for a dividend recapitalization?

Expected Answer: Should identify basic debt sources like banks and credit funds, and understand different types of debt (senior, subordinated) used in these transactions.