Most successful and stable companies are worth much more than stated book value. This real worth, known as "going concern" value, is the value placed on the ability of a business to generate consistent earnings and cash flow year after year.
In situations where business owners desire to withdraw significant capital from a business, owners will typically look first to their bank to finance the payment. In most cases, however, banks lend only amounts which can be safely secured by the firm's current and fixed assets, not its going concern value. There are, however, financial institutions and investment groups which will finance such "special payouts" in return for a package of debt and equity securities.
Benefits realized from such a "Leveraged Recapitalization" include:
- Owner liquidity
- Ability to maintain control of the business or retain a significant equity position.
- Diversification of part of the principal's overall wealth into cash.
- Added discipline that leverage can bring on company management.
The professionals at CoView can assist in:
exploring the feasibility of a leveraged recapitalization; deciding whether such an approach makes sense; raising the capital required to effect a transaction, and structuring a transaction that is in the best interests of our clients.
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