Mirus Capital AdvisorsMirus Capital Advisors

Mirus Capital Advisors, Mergers and Acquisitions, General

Every Owner Exits – Part III

Posted by

This month, I conclude my series on exit options (see Part I and Part II) with a discussion of recapitalizations and ESOPs.


Minority recapitalization is a type of investment in which an investor provides debt and equity capital in exchange for a less than 50% ownership stake in a company.

  • Capital can be used for shareholder liquidity and/or growth initiatives.
  • This type of investment can be an attractive alternative to a majority or full sale of a company because it allows business owners to realize similar levels of cash proceeds while retaining control of the business.

Dividend recapitalization is when a private equity firm or owner issues new debt to raise money to pay a special dividend to the shareholders.

  • The dividend reduces the risk for the PE firm / owner by providing early and immediate returns to shareholders but increases debt on the portfolio company’s balance sheet.
  • A dividend recapitalization is often undertaken to free up money for the PE firm / owner to give back to its investors, without necessitating an IPO, which might be risky.
  • A dividend recapitalization is an infrequent occurrence, and different from a company declaring regular dividends, derived from earnings.

In deciding which option to pursue a business owner must balance the probabilities of a favorable outcome with potential benefits and costs. For instance, it would make no sense for a slow-growing, small and marginally profitable company to seek an IPO. The business characteristics would likely  not attract enough buyers and the process on-going costs would be too expensive.

The typical considerations are:


  • An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company; this interest takes the form of shares of stock. ESOPs give the sponsoring company—the selling shareholder—and participants various tax benefits, making them qualified plans. Employers often use ESOPs as a corporate-finance strategy to align the interests of their employees with those of their shareholders.
  • An ESOP is usually formed to facilitate succession planning in a closely held company by allowing employees the opportunity to buy shares of the corporate stock. ESOPs are set up as trust funds and can be funded by companies putting newly issued shares into them, putting cash in to buy existing company shares, or borrowing money through the entity to buy company shares. ESOPs are used by companies of all sizes, including a number of large publicly traded corporations.
  • An annual business valuation provided by a third party is typically required to set the price of each share.

Exit Option Summary

Most options take 6-9 months and have specific pros and cons.


Founded in 1987, Mirus Capital Advisors is a middle-market investment bank that specializes in merger advisory, capital-raising services, fairness opinions and valuations to entrepreneurs, corporations and professional investors in consumer products, manufacturing, business services, technology, health care and resort & hospitality industries.  By combining a proven process, industry & transactional expertise, and personalized service, Mirus has completed hundreds of transactions for both public and private companies.  Our affiliate Mirus Securities, Inc. is a registered broker-dealer and FINRA member.  For additional information, visit www.merger.com.


While the Information is based on information that Mirus believes is reliable,  Mirus makes no representation or warranty as to the accuracy or completeness of the Information (including without limitation the conclusions to be drawn therefrom), and each expressly disclaims liability for any representations, express or implied, contained in, or for any omissions from, the Information or any other written or oral communications transmitted to the recipient in the course of the recipient’s evaluation of the information. This is not an offer to sell or purchase securities of any sort – public, private or government. Mirus disclaims any liability for loss or damage which may be incurred by any recipient of Information.