Why Would A Pe Firm Choose To Do A Dividend Recap Of One Of Its Portf

1.	Why Would A Pe Firm Choose To Do A Dividend Recap Of One Of Its Portfolio Companies?
Answer» Primarily to boost returns. Remember, all else being equal, more LEVERAGE MEANS a higher return to the firm. With a dividend recap, the PE firm is "recovering" some of its equity investment in the company - and as we saw earlier, the lower the equity investment, the better, SINCE it's easier to earn a higher return on a SMALLER amount of capital. Primarily to boost returns. Remember, all else being equal, more leverage means a higher return to the firm. With a dividend recap, the PE firm is "recovering" some of its equity investment in the company - and as we saw earlier, the lower the equity investment, the better, since it's easier to earn a higher return on a smaller amount of capital.

Why Would A Pe Firm Choose To Do A Dividend Recap Of One Of Its Portfolio Companies?

Answer»

Primarily to boost returns. Remember, all else being equal, more LEVERAGE MEANS a higher return to the firm.

With a dividend recap, the PE firm is "recovering" some of its equity investment in the company - and as we saw earlier, the lower the equity investment, the better, SINCE it's easier to earn a higher return on a SMALLER amount of capital.

Primarily to boost returns. Remember, all else being equal, more leverage means a higher return to the firm.

With a dividend recap, the PE firm is "recovering" some of its equity investment in the company - and as we saw earlier, the lower the equity investment, the better, since it's easier to earn a higher return on a smaller amount of capital.

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