hard · Investment Banking
In an LBO, what is the primary purpose of a 'Dividend Recapitalization'?
- To allow the sponsor to recover a portion of its initial equity investment early, thereby de-risking the deal and potentially boosting the IRR.
- To reduce the company's interest expense by replacing old debt with new, cheaper equity.
- To increase the company's EBITDA by adding back the dividend payment as a non-recurring item.
- To comply with tax regulations that require companies to distribute a portion of their Net Operating Losses (NOLs).
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