Growth Recapitalization

It is not uncommon that in conversations with a business owner, they express frustration at knowing there is a major growth opportunity in front of them they are simply not equipped to capture. There are different obstacles these owners identify, but most of them boil down to a lack of capital, a lack of expertise, or the wrong internal management system. This situation is a perfect opportunity for a growth recapitalization. The concept is that the owner sells off a portion of their equity to create a business partnership with someone who possesses what the organization is lacking. In a recapitalization, the owner maintains an ownership stake so they can participate in achieving next-level growth and sharing in the value that is generated.

In one such case, a business owner stated he was currently producing around $10M in revenues but was certain there was an opportunity to be at $100M if only he had access to capital. After running through our process with him, we agreed that the untapped potential was certainly there, determined he had the proper skill set and internal systems to scale tenfold, and such growth would require access to capital in blocks of $10 – $50M. We also determined at the heart of the operation and its growth opportunity was a strong relationship component. At the end of our analysis and a findings review with the owner and his leadership and advisory team, we determined we were looking for a recapitalization partner who was aligned with the company’s culture, vision, and core values first and foremost, and that secondarily the new partner would need to prove a capacity for quickly facilitating large sums of capital for inventory acquisition purposes.

How Blue Sky Helped

It took eight months to find the right partner. Many candidates entered the process and most were eliminated before meeting with the owners. A handful of candidates were invited for tours of the facility and discussions with leadership. One group rose above the rest with a good match of personalities, an alignment of vision, and proven ability to supply capital as needed. They also brought several new relationships to the table as potential new clients. Within two years of closing, the team was producing $50M in revenues and was on track to exceed $75M in year three. The founder was filled with new energy and passion for his organization as he was able to realize the potential he had known out there. The recapitalization created a partnership that is growing stronger every year, and the business is quickly earning its place as a market leader within their industry.