Leveraged Dividend Recapitalizations and Leveraged Share Repurchases

Understand the Similarities and Differences and Which Transaction May be Right for Your Company

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Leveraged dividend recapitalizations and leveraged share repurchases are two corporate finance tools that are available to owners of private companies. These tools can be used to create liquidity outside the ownership of private businesses. Interestingly, as we will see, leveraged dividends and leveraged repurchases have very similar impacts on companies (assuming similar companies and same-sized transactions), and quite different impacts on the owners of the companies. In this post, we will illustrate the impact of a leveraged share repurchase and a leveraged dividend on the same company. This analysis will enable us to see the impact leverage has on the company and also, the different impacts the transactions have on owners.

Is Your Business Ready for Sale?

First in a Series on This Important Question

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“Is Your Business Ready for Sale?” is one of the most pressing question facing business owners today. And the question is important for advisers to businesses, since we are instrumental in asking hard questions and, indeed, have the responsibility for asking hard questions of our private company clients. At the outset of a new series of posts, let me say categorically, I am not, not, not suggesting that your business should be up for sale. Bear with me while we focus on the actual question of “Is Your Business Ready for Sale?”

Your Company Has a Dividend Policy

Even If You Don't Think So

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When speaking to business owners in management interviews, I always ask a couple of question: What has been your dividend policy in the past? And, what do you expect it to be going forward? Interestingly, many business owners reply that they don’t have a dividend policy. At that point, I reply that they have had a dividend policy historically, and that they will have a dividend policy prospectively. Considering this, we seek to answer what is a dividend payout ratio and what are the types of dividends?

The Stock Market is “Plunging” But There is No Panic in the Private Company Business World

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With oil prices dropping briefly below $40 per barrel on Friday (August 21, 2015) and the stock market dropping sharply in the recent past, investors in the public markets are being advised not to panic. The headline for the front page of the Saturday/Sunday Edition of The Wall Street Journal (August 22-23, 2015) reads “Stock Plunge Picks Up Speed.” In light of the circumstances, what happened to the value of closely held and family business in America over the last week?

Where Do You Want the Ownership of Your Company to be in 3, 5 or 10 Years?

Part Two

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This is the second in a two-part series: Where Do You Want the Ownership of Your Company to be in 3, 5, or 10 Years? In this first post, we introduced the Ownership Transfer Matrix. In the this concluding post, we dive deeper into the ownership question.

Where Do You Want the Ownership of Your Company to be in 3, 5 or 10 Years?

Part One

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This is the first in a two-part series: Where Do You Want the Ownership of Your Company to be in 3, 5, or 10 Years? In this first post, we introduce the Ownership Transfer Matrix. In the concluding post, we dive deeper into the ownership question.

Would You Rather Sell up to Half Your Company to Get Liquidity or Engage in a Leveraged Dividend Recapitalization and Keep All of it for Your Owners

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Recently I spoke with a business owner who had almost sold about half of his company to a private equity investor a few years ago.  The facts will be changed in this story so that neither he nor I should be able to recognize his company.  However, the conversation highlights a potential opportunity for owners […]

Interim Time and Your Business End Game

Preparing for the End of One Thing and the Beginning of the Rest of Your Life

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This post introduces the concept of “interim time,” which is the easily lost time between two critical goal posts in the life of a business owner, his or her current status quo and their business end game. It is, after all, what we do during this interim time that prepares us not only for our inevitable business end games, but also for the rest of our lives.

10 Good Reasons for Private Company Dividends

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The issue of whether private companies should pay dividends is an important one. Many private company business owners (and boards) resist paying dividends because they desire to retain flexibility at their companies and do not desire to incur risk from leverage (or slower ability to repay debt). The interesting thing about this position is that it creates polar opposite effects on private companies and their shareholders. What follows are ten good reasons to consider paying private company dividends and five things that some folks say represent the downside.

Announcing the Ownership Transition Bundle

Announcing a new Ownership Transition Bundle for business owners and advisers.

My book, Buy-Sell Agreements for Closely Held and Family Business Ownershas been available since 2010 and has sold thousands of copies.  The book sells for $25 (plus shipping).

My latest book, Unlocking Private Company Wealth, was released in late 2014, and is selling at much higher rate than the buy-sell agreement book.  This new book deals with managing private company wealth in ways you likely have not thought about.  This book sells for $25 (plus shipping).  That makes $50 for the two books.

We are now offering an Ownership Transition Bundle, consisting of both books for only $35 (plus shipping).  As they say on selling TV networks, “But wait, there’s more!”

In addition to both books, you will receive immediate downloads of our very popular checklists, the Buy-Sell Agreement Review Checklist, and the Promissory Note Checklist.  The review checklist is by far my most downloaded resource, so this is quite a package!

If you are interested in ownership transition for closely held and private companies, the Ownership Transition Bundle will tell you a great deal about managing private company wealth in the process of thinking about ownership and management transitions.

The buy-sell book will tell you about the unexpected consequences for ownership transition, often quite adverse, when poorly written buy-sell agreements are triggered.  The free resources are available to help discuss and plan for important aspects of transitions.

Buy it now: The Ownership Transition Bundle.