In healthcare, you adjust a treatment plan as conditions evolve. In a practice transition, recapitalization (or “recap”) offers a similar kind of adjustment—rebalancing ownership and capital so you can take appropriate liquidity today while preserving continuity, culture, and future upside.
What is recapitalization…really?
In corporate finance, recapitalization is the restructuring of a company’s mix of debt and equity. This means sometimes adding equity or sometimes adding debt to meet strategic goals—like stability, growth, or ownership transition.
It’s not automatically a full sale. Rather, it’s a capital structure change that can be paired with partial liquidity for current owners.
Why do practice owners consider it?
For many DVMs, the liquidity is the draw. In a typical private‑equity–backed recap, you might sell a majority interest, keep a minority stake, and stay involved operationally. That lets you de‑risk personally, bring in capital and infrastructure, and still participate in any future value creation.
Legal guidance often frames this as a way to address succession, diversify net worth, and fund growth while keeping leadership in place.
When people talk about recapitalizations, they usually also bring up rollover equity. This is where you reinvest a portion of proceeds into the new ownership structure so your interests remain aligned with the next phase. When done well, rollover terms (vesting, buyback rights, liquidity paths) materially affect your eventual outcome, so it’s important to draft this carefully.
Variations you’ll hear about
- Minority recapitalization. You sell 20–49% while retaining control. The proceeds can fund growth, clean up your cap table, or provide partial liquidity for retiring partners.
- Leveraged recapitalization. The company adds debt to repurchase equity (or pay a special dividend), changing the debt‑to‑equity mix. This obviously can increase financial risk (if overdone).
Benefits and trade‑offs
What tends to work well:
- Continuity for your team and clients. Recaps commonly keep medical leadership and brand in place, which protects culture and client trust. (That continuity is a major reason sponsors prefer recap structures in resilient, service‑driven sectors.)
- Second‑bite potential. Keeping rollover equity lets you participate if there’s growth or another sale down the road.
- Flexible pacing. Compared with an outright sale, you can stage your personal transition—reduce hours, mentor successors, and plan a calmer exit timeline.
What to diligence carefully:
- Control & governance. Even with a minority stake, board rights, consent thresholds, budgets, and hiring authority should be explicit. Getting appropriate guidance around rollover and minority protections is crucial.
- Capital structure risk. Leveraged or dividend recaps that add significant debt can narrow operating flexibility. Stress‑test your cash flows and covenants so care quality (and your sleep) aren’t compromised.
- Future liquidity path. Understand how (and when) your rollover equity can be sold.
Next steps
If your goals include (1) taking some chips off the table, (2) keeping your clinic’s identity and standards, and (3) participating in the next phase of growth with professional backing… then, recapitalization is worth a close look.
If your goals are to have a clean exit now, with no post‑close involvement, or maximum price without rollover… then, a traditional sale may be more appropriate for you.
The key is mapping the structure to your personal, clinical, and financial objectives—and negotiating the details with the same care you’d bring to a complicated case. No matter which way you’re leaning, let’s explore this together.
