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Happiness has many roots, but none more important than security. -Edward R, Stettinius, Jr.

Under the right circumstances and by utilizing an InHouse Recap, Valufinder can create a liquidity event which rewards ownership but does not impair the company's future. In broad outline, here are the major components and advantages of an InHouse Recap:

  1. Total Freedom: The proceeds from the InHouse Recap can be used by owners in any way they choose. Satisfy personal dreams, provide long-term security for their family, diversify their portfolio, plan their estate, buy out their partners, purchase competitors, or whatever. Your money, your choices.
  2. Significant Payout: Assuming no existing interest-bearing debt, the loan given to the company is comprised of securities ranging from senior secured debt to unsecured subordinated debt for a total value between 2-4.5 times adjusted EBITDA. If there is existing interest-bearing debt, the new loans are net of these amounts. Usually existing debt is refinanced within the new financing package.
  3. No Change in Ownership: The normal InHouse Recap typically does not require any sale of the owner's stock.
  4. Tax Efficient: With the Recap, a loan is made to the company which, in turn, declares a special dividend to the shareholders. The federal tax rate for the dividend is normally an attractive 20%, although you should consult your own tax advisor. Further, the interest the company pays on the loans is typically tax-deductible.
  5. No Personal Guarantees: These loans do not require a personal guarantee. If there is existing debt which is being refinanced, the owner is normally relieved of any personal guarantees on that debt.
  6. Realistic & Flexible Structure: Different types of loans, interest rates, amortization schedules and maturities are custom tailored to match a realistic assessment of the company's future earnings potential, ongoing capital expenditures, and, if needed, funds required for growth.
  7. Most Companies, Most Sizes: Our InHouse Recap is extremely flexible and can work for stable mundane businesses as well as companies with strong sales and earnings growth. It can even work for companies with erratic earnings or those losing money with a large asset base. As for size, financing sources will generally look at companies with adjusted EBITDA of as low as $5 million and up to $40 million.
  8. Companies With Problems: Companies with impairments such as legal or EPA issues, which would make them difficult to sell, can utilize an InHouse Recap. As long as the earnings needed to service the debt can be segregated from the problem during the term of the debt, an InHouse Recap can be created.
  9. Full Valuation: If there is any equity investment by the financing source (usually not necessary), it is considered a yield enhancement by the lender. These investments are typically based on a full valuation of the company as if 100% were being sold.
  10. One-Stop Financing: Our InHouse Recap usually offers a one-stop financing source which can provide all the components of the recap in one comprehensive package. Further, working with sophisticated financiers Valufinder can also create a single package of different tranches of financing from multiple sources.
  11. Quick Turnaround: Because these financing sources are not buying the company, they do not require the same extensive due diligence. Once the initial company profile is distributed to these sources, a recap can usually be completed in about 14 weeks. In exceptional circumstances, it can be done in 4 weeks. In contrast, a typical acquisition takes 6-9 months to complete.
  12. Personal Confidentiality: Only selected senior managers need know what you are doing. There are no company-wide announcements. Critical operating matters as well as your personal finances and objectives remain strictly confidential.
  13. Corporate Confidentiality: No exhaustive offering memorandum or pie-in-the-sky valuation needs to be created or shared with the outside world. Initially, only a short company profile is written accompanied by a financial overview with information about both current and long term assets, and product literature. Confidentiality Agreements are executed before an exchange of information.
  14. Nominal Disruptions: There are no long lines of potential buyers, including competitors, visiting the facilities and learning company secrets and disturbing employees. Visits are severely restricted.
  15. Owner Gains Access to Seasoned Executives: The owner now has access to financially sophisticated executives with whom, if they chose, they can discuss various business opportunities and gain insights and possible help.