Recapitalization

Changing a company's mix of debt and equity, often to pay cash to owners, bring in a new investor or reduce debt.

Checked 9 Oct 2026 · 2 sources

What is a recapitalization?

A recapitalization changes a company's mix of debt and equity, often to pay cash to owners, bring in a new investor or reduce debt. In a dividend recap, a portfolio company takes on new debt and pays the proceeds to its owners, returning some of the sponsor's money without a sale. In an equity recap, the company issues new shares, often to pay down debt.

Why it matters to a revenue leader

A recap changes the company's room for error. After a dividend recap, more debt means higher interest costs and tighter loan terms, so a missed forecast matters more. Revenue leaders should know when a recap happened and what lenders now expect, because the sales plan becomes part of what keeps the company within its loan agreement.

Example

Fictitious numbers

Three years into the hold, a waste services company with EBITDA of $20M and net debt of $60M borrows another $40M and pays it to the sponsor as a dividend. Net debt rises from 3 times to 5 times EBITDA. With a covenant limit of 6 times, the CFO asks the CRO for a more conservative forecast.

The question to ask

"Have we recapitalized, and how much room does our debt leave if revenue comes in below plan?"

Sources

  1. Recapitalization checked 9 Oct 2026
  2. Dividend Recapitalization checked 9 Oct 2026

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