Case Study: Dividend Recapitalization

We have worked with companies to achieve many business objectives and favorable outcomes for company owners.

Objective

A highly successful distribution business was in the final stages of selling to a strategic acquirer when the transaction fell apart. Despite prodding from an investment banker to restart the process, the owner was fatigued and disheartened by the ordeal. The owner was grappling with competing objectives: obtaining liquidity to diversify his holdings, reducing the business’ day-to-day reliance on him and doing what was best for his employees.

Solution

Ironwood worked with the business owner and his attorney to structure a recapitalization in which the CEO took substantial “chips off the table” and began a transition away from day-to-day responsibilities. Ironwood sourced a local equity investor and senior debt provider to complete the capital structure. The transaction provided liquidity to the owner, but also served as a mechanism for key managers and employees to participate in future equity appreciation.

Outcome

The business performed extremely well during Ironwood’s holding period, making a key tuck-in acquisition in a strategically critical geographic region. At an opportunistic time, Ironwood identified and worked with a value-added investment banker to approach a small group of potential buyers. The company was sold at a premium valuation to a strategic acquirer giving the owner a “second bite at the apple” while providing attractive returns for his investors and employees.