Liquidity Through Recaps


In today’s frothy market, many private equity firms seem to be on the sidelines, waiting for better entry points for platform investments. Consequently, sponsors are holding companies longer, driving value by focusing on operational improvements, closing more add-on transactions, and getting liquidity through dividend recapitalizations.

Middle market firms have been particularly active on the dividend recap side, fueled by a robust lending environment where there seems to be a new private credit fund launched every week. In fact, of the total capital raised in the loan market to fund dividends in Q3’16, 14% of all dividend capital raised came from deals sized at $350 million or less, up from just 7%, in Q2.