Conditions for selling a business or completing a dividend recapitalization have been generally favorable for owners over the past several years. Each approach carries a unique set of pros and cons; understanding both is critical to the process of gaining liquidity.

Sale
Dividend Recapitalization
Debt Equity
Typical timeframe for completion
(after investment bank has been engaged)		 12–24 months 2–3 months 2–4 months
Limiting factor for amount of capital that can be raised Buyer's valuation of the company Company's ability to take on additional debt and lender's willingness to lend Owner's willingness to give up equity and investor's valuation of the company
Impact on management control Transfers to buyer Current owners retain control Current owners typically retain control, but investors usually have voting rights and receive board seats
Opportunity to participate in future growth Limited to rollover equity 100% retained by owners Retained by owners but reduced by the amount of equity sold
Timing of liquidity Majority received upon closing less earn-outs, rollovers, and vesting provisions Received upon closing Received upon closing
Impact on succesion planning May negate the need for finding a successor No impact Investors may be interested in expanding ownership stake and taking management control
Impact on company's future performance Depends on buyer's plans for the company Debt payments may make company more vulnerable to business downturns; covenants may limit the company’s operating flexibility Limited impact