Growth Capital and Recapitalization

Private equity growth capital focuses on providing capital to established, growing companies to fuel expansion, acquisitions, or restructuring, typically taking a minority stake in the company, but sometimes requiring a controlling position. For private equity firms to provide growth capital, a company typically needs to be beyond the startup stage, demonstrating significant customer traction, strong revenue growth (often 30% or higher), an established business model, and a path to sustainable long-term margins.

Mezzanine debt growth capital is a type of hybrid financing that sits between senior debt and equity in a company’s capital structure, offering a way to fund growth while potentially avoiding full equity dilution. It combines features of both debt and equity, often with higher interest rates and potential for equity participation, making it attractive for companies seeking to fund specific growth projects, make acquisitions, bridge funding gaps, and achieve strategic milestones. Mezzanine debt often works in conjunction with senior bank debt. For a mezzanine debt firm to provide growth capital, a company typically needs to be in the lower middle market with enterprise valuations between $5 million and $100 million and a minimum EBITDA threshold of $2 to $3 million.

Uni-tranche capital is a type of financing that combines both senior and subordinated debt into a single loan (sometimes with preferred equity), offering a streamlined and flexible alternative to traditional lending structures, particularly popular in the private equity and middle-market leveraged finance sectors. For a Uni-tranche capital firm to consider providing growth capital, a company typically needs to be a middle-market business with revenue under $500 million and an EBITDA under $50 million, although specific thresholds can vary.

A private equity majority recapitalization involves a private equity firm acquiring a controlling interest (more than 50%) in a company, allowing the owners to achieve partial liquidity while retaining a minority stake and continuing to manage the business while the PE firm provides capital and expertise to drive growth and strategic decisions. This allows business owners to achieve partial liquidity while remaining involved in the company’s future and profiting from the growth through their retained minority stake. While any company can consider a majority recapitalization, private equity firms typically prefer companies with a minimum of $1 million in EBITDA with some private equity firms having a higher EBITDA threshold. A few private equity firms will consider a majority recapitalization for companies doing less than $1 million of EBITDA.

A private equity minority recapitalization involves a private equity firm investing in a company, acquiring a minority stake (typically 20-49%), while the existing owners retain control with the private equity firm providing capital for growth or other strategic initiatives (some partial liquidity for the owners is also a possibility). The investment can be structured using a combination of debt and equity, with the private equity firm potentially providing preferred equity or mezzanine financing. The minority recapitalization can improve the company’s financial position by restructuring debt and equity. There’s no strict size requirement for a company to be eligible for a private equity minority recapitalization, but generally companies with a minimum EBITDA of $3 million and up are often considered.