Recapitalization (M&A Glossary)

Summary

A change in a company’s capital structure whereby the company swaps its existing securities for new ones (commonly, stock is exchanged for bonds). The objective is to make the company more financially stable or to increase stock value. A leveraged recapitalization (or leveraged recap) is a takeover defense strategy in which a company borrows a large amount of capital using company assets as collateral. The company uses the borrowed funds to pay dividends to their shareholders, or for a self-tender offer. This process puts more cash in the hands of shareholders while the added debt makes the company less attractive to hostile buyers.