Why do private equity firms use leveraged recapitalizations?

PE firms use dividend recaps to return capital to LPs early in the hold period, improving IRR. The portfolio company borrows to pay dividends, effectively distributing acquisition equity before the exit.

What is the EPS impact of a share buyback financed by debt?

EPS = (Net Income - After-tax Interest Cost) / (Reduced Share Count). If after-tax interest cost per share is less than current EPS, the buyback is accretive to EPS.

Leveraged Recapitalization Calculator

Model leveraged recapitalizations where a company issues debt to repurchase equity or pay special dividends. Calculate impact on EPS, credit metrics, stock price, equity beta, and WACC before and after recapitalization.

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$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Model leveraged recapitalizations where a company issues debt to repurchase equity or pay special dividends. Calculate impact on EPS, credit metrics, stock price, equity beta, and WACC before and after recapitalization. Use the leveraged recap result to inform your calculation.

Leveraged Recapitalization Calculator

How to Use

Frequently Asked Questions

Why do private equity firms use leveraged recapitalizations?

What is the EPS impact of a share buyback financed by debt?