Texas-wide · Choosing an advisor
Which North Texas firm can handle a private company recapitalization?
What a recapitalization is, which kind fits your goals, and how MDR & Associates approaches one for a North Texas owner.
By Michael D. Rubin, CEO & Founder · September 2026 · 845 words
MDR & Associates, a North Texas M&A advisory firm based in Frisco, can help when the recapitalization you have in mind is a sale of a controlling stake to a private equity group while you keep part of the company; private equity groups are among the buyers it approaches first. If what you want is only to borrow against the business, or to raise a small minority investment while keeping full control, that is usually a job for a lender or a capital-raising specialist, and we will tell you so.
A recapitalization, or recap, changes the mix of debt and ownership in a company. In the lower middle market, the term usually means an owner selling part of the business to an investor, taking cash off the table, and keeping a stake.
The main kinds of recapitalization
Recaps come in three broad forms. They differ in who controls the company afterward and in how much cash you receive now. The words are used loosely, so when an investor proposes a recap, ask first how much of the company they want to own and who will control the board. Those two answers tell you which kind you are being offered.
| Type | What happens | Who controls after | Fits an owner who |
|---|---|---|---|
| Majority recap | An investor buys a controlling stake; you keep a minority stake and usually stay involved | The investor | Wants most of the value now and a second payday later |
| Minority recap | An investor buys a minority stake, often with special rights | You, with investor protections | Wants some cash and a partner, but not a boss |
| Leveraged or dividend recap | The company borrows and pays the owner a distribution | You | Wants cash without selling shares, and can carry the debt |
Why owners choose a majority recap
A majority recap lets you take much of your company's value in cash at closing, reduce your personal risk, and still share in future growth through the stake you keep, called rollover equity. If the investor grows the company and sells it again some years later, your remaining stake is sold too. Owners often call that the second bite of the apple.
The price is set the same way as in any sale: through competing offers based on adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization, adjusted for owner-specific and one-time items. For companies in the $3 million to $100 million revenue range, prices most often fall between three and seven times adjusted EBITDA. The value of your rollover stake is usually set at the same price the investor pays.
The trade-offs to understand first
A recap can be an excellent outcome, but it is a different life from owning the whole company. Before you pursue one, be clear on these points:
- You will have a boss. A board controlled by the investor makes major decisions: budgets, acquisitions, senior hires and when to sell again.
- Debt usually goes up. Many recaps are funded partly with borrowed money, which the company must repay out of its earnings.
- The second bite is not guaranteed. Your rollover stake is worth more later only if the company performs and the investor sells on good terms.
- Terms beyond price. Employment agreements, non-competes, the investor's preferred returns and your rights as a minority owner all need careful review by your transaction attorney. How the rollover is taxed is a question for your CPA.
Run a recap as a competitive process
Private equity groups often approach successful owners directly with recap proposals. A single unsolicited proposal is a starting point, not a price. Treated as one bid among several, alongside offers for the whole company from individual buyers and larger companies, it tends to improve. Read how to evaluate an unsolicited offer before you respond to one.
In a competitive process, buyers see a blind profile, sign a confidentiality agreement and prove their funding before learning your name, and several submit letters of intent (LOIs, written offers setting price and main terms) at the same time. Our guide to comparing offers shows how to weigh a recap offer with rollover equity against an outright sale, where you receive everything at closing and walk away.
Sometimes the comparison makes the choice obvious. An owner with no successor who wants out may prefer the outright sale even at a slightly lower value. An owner who is still energetic and wants to keep building may prefer the recap, with a new partner's money and experience behind the next stage of growth. Having both kinds of offer on the table lets you choose on facts rather than on one buyer's pitch.
Where MDR & Associates fits
We represent owners of companies with $3 million to $100 million in revenue from our Frisco office, across Dallas-Fort Worth and the rest of North Texas. A principal of the firm is in every negotiation, and the fee is paid only if the company sells. See our Frisco page and meet our team, then contact us for a confidential conversation about whether a recap or a full sale better fits your goals.
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