Recruiter's Glossary

Examples: LBO • Co-investment • Wind-down Period

Leveraged Recapitalization

Term from Private Equity industry explained for recruiters

A leveraged recapitalization is a financial strategy where a company takes on new debt (borrows money) to pay a special one-time dividend to its owners or shareholders. Think of it like refinancing a house to take out some cash, but for businesses. Companies use this approach to give owners some cash while they keep running the business. It's different from selling the company completely. Private equity firms often use this strategy to get returns on their investments without having to sell the entire company. It's also called "leveraged recap" or "dividend recap" for short.

Examples in Resumes

Led Leveraged Recapitalization process resulting in $50M dividend distribution to shareholders

Executed Leveraged Recap strategy for mid-market manufacturing company

Structured Dividend Recapitalization deal generating 3x return for investors

Advised client on Leveraged Recapitalization alternatives to complete company sale

Typical job title: "Private Equity Associates"

Also try searching for:

Investment Banking Associate Private Equity Associate Investment Associate Financial Analyst Deal Professional Transaction Advisory Associate M&A Associate

Where to Find Private Equity Associates

Professional Organizations

Online Networks

Job Resources

Example Interview Questions

Senior Level Questions

Q: What factors would you consider when evaluating a company for a potential leveraged recapitalization?

Expected Answer: A strong answer should discuss stable cash flows, debt capacity, industry stability, management team quality, and growth prospects. Should also mention risk assessment and maintaining appropriate debt levels for company health.

Q: How would you structure a leveraged recapitalization to maximize value while maintaining company stability?

Expected Answer: Should explain balancing debt levels with cash flow, considering different types of debt (senior, subordinated), maintaining financial flexibility, and ensuring the company can meet its obligations while still growing.

Mid Level Questions

Q: What are the main benefits and risks of a leveraged recapitalization?

Expected Answer: Should discuss benefits like shareholder returns and tax advantages, while addressing risks such as increased debt burden and reduced financial flexibility. Should demonstrate understanding of when this strategy is appropriate.

Q: How do you analyze a company's ability to take on additional debt for a recapitalization?

Expected Answer: Should explain looking at cash flow coverage ratios, existing debt obligations, industry comparables, and future growth projections to determine appropriate debt levels.

Junior Level Questions

Q: Can you explain what a leveraged recapitalization is in simple terms?

Expected Answer: Should be able to explain that it's a process where a company takes on new debt to pay a special dividend to shareholders, while maintaining existing ownership structure.

Q: What basic financial metrics would you look at when considering a leveraged recapitalization?

Expected Answer: Should mention EBITDA, cash flow, existing debt levels, and basic coverage ratios. Should understand the importance of company's ability to service debt.