Recapitalization (recap)

Definition

A change in who owns the equity, short of the company changing hands.

Why It Matters

It is the most common way a private-equity purchase of a founder-run business gets announced, and the word is doing real work: a majority recap sells control while the owner keeps a slice, a minority recap takes cash off the table and leaves the owner in charge. For a searcher reading exit news, the distinction decides whether the operator actually sold. For an owner reading a term sheet, it decides whether the second sale is the one that matters, since the stake you keep is priced by the buyer's exit on the buyer's timing.

In numbers: In a majority recap at a 6x multiple on $2M of EBITDA, an owner selling 70% takes about $8.4M off the table and keeps 30% of whatever the next sale brings.