Private Company Recapitalization

Trovare is an experienced sponsor of and investor in private company recapitalizations.

What is a Private Company recapitalization? A private company recapitalization is a partial sale of a private company. In addition to receiving a significant amount of cash at closing, the shareholders retain substantial equity ownership and continued responsibility for running the company. To complete the recapitalization, Trovare invests the equity and arranges the most attractive debt financing available in an amount that will allow the company to continue to grow without undue financial risk.

Following the recapitalization, some or all of the old shareholders and Trovare - the new financial partner - would still privately hold the company. Together they continue to grow the business, with Trovare lending assistance on financial, strategic and M&A issues. Then, at the appropriate time the company could go public, be sold privately or undertake another recapitalization. This structure gives the shareholders a "second bite at the apple" which, if all goes well, could be even bigger than the first.

The Mechanics of a Recapitalization

In this example:

  • Company XYZ is worth $100 million
  • The management team and Trovare are comfortable running the business with $50 million of debt
  • An agreement is reached to sell 70% of the equity in recapitalized Company XYZ to Trovare, and allow the management team to reinvest 30% of the equity on a tax-free basis.

The shareholders would receive $85 million in cash and keep a tax-free 30% ownership position in Company XYZ. The $85 million could be shared equally among all shareholders or some shareholders could be cashed out entirely, with ongoing management receiving more stock.

Sources of Funds        
Debt   $50.00    
Trovare Equity   $35.00    
Shareholder Retained Equity Value   $15.00    
Total   $100.00    
Use of Funds        
Cash to Shareholders   $85.00    
Shareholder Retained Equity Value   $15.00    
Total   $100.00    
Ongoing Ownership        
Trovare   $35.00   70.0% Ownership
Shareholders Reinvestment   $15.00   30.0% Ownership
Total Equity   $50.00    

Therefore, the owners received 85% of the Company's value in cash up-front and still retained a 30% ownership.

Recapitalization vs. Outright Sale or IPO

  • An outright sale would result in the shareholders receiving the full $100 million - but no ongoing ownership.
  • An IPO, if possible, would raise money for the Company, perhaps at a higher valuation than a private transaction, and would dilute shareholders' ownership, but the Company's shareholders would typically not be allowed to receive any cash proceeds at the time of the IPO.

To speak with a professional in the Private Investment Group about a potential transaction, please call (847) 234-4050 or email to

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Deal Origination
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Building Value: Conclusion
Investment Approach and Size
Investment Approach
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Management Buyouts
Private Company Recapitalization
Distressed Company Investment
Growth Financing Investment