With shifting macroeconomic conditions, private equity sponsors are increasingly turning to alternative liquidity tools. VRC’s Jason Mutarelli is featured in Financial Advisor IQ’s ThinkTank, breaking down the mechanics, market trends, and critical risks surrounding dividend recapitalizations.

While a dividend recap can effectively return capital to limited partners and improve IRR ahead of a full exit, it also leaves the operating company with a higher debt burden. When leverage increases, boards and management must navigate post-transaction solvency to help mitigate the risks of default and personal liability.