CEO/Entrepreneur Exit & Liquidity Options

Ephor Newsletter Q2 2026

March 2026

This March 2026 Newsletter, as we committed, is the next “chapter” in our sequential guidance to CEO Entrepreneurial/Founders who are contemplating Selling or Exiting Your Business in the near term. 

As a refresher, in Ephor’s Q4 2025 Newsletter, we provided a "Playbook" on “Exit Planning Fundamentals,” and then subsequently in our January 2026 Newsletter, we provided an educational tutorial on “Buyer Types & their Attributes.” 


This March 2026 Newsletter is quite timely considering the current favorable economic & availability of capital environment. As we marshal in Q2 2026, it is clear, the Trump Administration’s economic agenda, the operating, the investment environment, and the Exit (or Wealth Transfer) opportunities have drastically improved over those of the Biden years. As such, Ephor suggests 2H 2026 and 2027 present themselves as an excellent time frame for exiting and exercising shareholder liquidity options. 

 

Overview

Selling or exiting your business is most likely the most important and relevant financial decision of your financial life. Selling or exiting your business for many CEO Entrepreneurs means selling 100% of your business: Most assume that retiring or a desire to do something else, combined with just the thought of accepting the fact you will lose “control of your baby, becomes a harsh reality.” Possibly you are just not ready for all those realities. You feel you still have the energy and desire to continue; you still believe in your company and its future; and you are still motivated by working with the staff, and customers.


Well, guess what? There are other options than just selling or exiting your business!

 

Enter the concept of “Recapitalization”: A recapitalization of your business or “Recap” is a viable Exit and/or Wealth Transfer Alternative for many CEO Entrepreneurs & Founders, especially those that are in the age range of 40 to 55 years old. 

 

Below, we present a high-level overview of the highlights of the “Recap” Alternatives that include: 

  • The Mezzanine Alternative

  • The Minority Ownership Alternative and,

  • The Majority Ownership Alternative 

 

The Mezzanine Financing Alternative

 Overview & Definition: 

The word “Mezzanine,” utilized in the financial engineering arena, describes a layer of financing that “sits” on the balance sheet between classical asset-based financing or senior bank debt financing, and the equity component of the company’s balance sheet.  Often in a typical Mezzanine structure, there is a debt component that is tied to an equity component that generally represents a small minority equity interest in the company on a go-forward basis. 

 

Shareholder Considerations: 

This alternative generally provides partial exiting & wealth transfer through the combination of debt and equity, and therefore is very “equity efficient”. Likewise, this instrument provides a meaningful wealth transfer amount that can be ~2.5x to 5.0x times trailing 12-month EBITDA performance. Therefore, it is very attractive in satisfying near-term liquidity objectives, while maintaining a significant equity position for long-term wealth creation objectives. In layman's terms, this is the “second bite at the apple” concept.

 

Mezzanine Financial Sponsor Types 

  • Mezzanine Providers: There are approximately 15-25 quality “mezz shops” in North America that are Useful Capital and have invested in technology-enabled and outsourcing-oriented business models over the past 7-8 years.

  • Small Business Investment Corporations (SBIC’s). SBIC’s are US Government sponsors of Capital and have become very active participants in the sector. Generally, there are at least 1-3 such providers in every region of North America. This is a very viable "Recap" alternative for emerging and scalable business models.

 

The Minority Recapitalization Alternative 

Overview & Definition: 

A minority “recap” is defined as 49% or less of the company’s equity and voting rights that is tendered for exiting & wealth transfer objectives. Generally, the wealth transfer aspect of a “minority recap” is combined with an infusion of growth capital and/or part of executing an acquisition growth plan. This alternative is common as “step one in a phase out sale or exit of a company”. The most relevant benefits of this alternative are that current ownership/equity maintains governance & operational control.   

 

Shareholder Considerations: 

The Minority Recap alternative generally provides a substantive exit & wealth transfer portion that can provide an enterprise value of 4x-6.5x times trailing twelve-month EBITDA, combined with maintaining control and the attractive “second bite at the apple.” This alternative is most attractive to existing shareholders who have investment or wealth transfer objectives that are required in both the very near-term combined with longer-term objectives tied to the company's performance. 

 

Minority Recap Financial Sponsors

  • Private Equity shops that specialize in “minority recaps” there are Private Equity groups that specialize and focus on minority recaps, as such, they can be very Useful Capital. Ephor currently monitors these types and has worked with over 25+ years of service; 12-14 of these providers with established track records in the sector.

  • Alternative Asset providers have recently entered the “Minority Financing Exit alternative and will become more prevalent in the near-term, and thus far have illustrated "Deal Structure Flexibility" beyond what private equity has been willing to do. 

The Majority Recapitalization Alternative

Overview & Definition: 

The “majority recap” alternative occurs when the shareholders tender greater than 51% of the entity's shareholder interest and voting rights. However, it is most common that greater than 70% is the average value that is commonly tendered. This alternative is quite common where the company business model is proven, scalable, and has provided historically sustainable revenue and EBITDA growth rates. This alternative is most attractive when the founders and shareholders are “aged” as such, a liquidity event is “a permanent financial life-changing event”. 


Shareholder Considerations: 

This alternative generally includes a “substantive” exit & wealth transfer amount that can provide an enterprise value of 5-10 times trailing twelve-month EBITDA.


However, loss of control and no significant “second bite of the apple” are the trade-offs in this wealth transfer alternative. Often there are “earnout provisions” that sequester the cash amount received at closing. This alternative is most attractive to existing shareholders that are aging, or need to diversify their personal investments, or feel that current management simply does not have the skills or know-how to take the business model to the next level.  

 

Majority Recap Financial Sponsors

  • Private Equity shops that specialize in “majority recaps” of technology-enabled service or outsourcing business models, and other “buyout-oriented” initiatives. There are ~35 “Useful Capital” Majority Buyout PE providers in the business services sector in North America. Ephor  both monitors or has worked with over 30 of these types in our 25+ years of service in the sector.

  • Family Wealth Offices have, over the past 2-4 years, entered the market and illustrated to be more “Patient Capital,” provide more flexible term structures, and are rapidly becoming “Useful Capital” providers. Family offices are Ephor's “partner of choice in Buyout situations”.

  • New “entrants” in the Majority Recap Market place again include Alternative Asset Funds and other Government sources such as SBICs.

At Ephor, over our 2 decades of service to you, we have utilized, studied, and have been participants as advisors, investors & intermediaries in all the above alternatives during our activities with our client companies and investments, as such Ephor’s guidance to you includes:

  • Each of you should carefully evaluate your specific liquidity, Exit, and Wealth transfer objectives and the associated "Recap"alternatives.

  • You should decide when your timing is right.

  • You should seek outside assistance in the final evaluation and execution of a chosen alternative or two.

In closing, I often public speak on Exiting, and Wealth Transfer Initiatives for the CEO Entrepreneur, and I always close my remarks with:  

 

Never treat our hard-earned equity value as a "Commodity”.

 

In our April 2026 Newsletter, we will take a deeper dive into each of these "Recap" alternatives to ensure you are fully informed on each of these and how they” best fit” your situation and your Wealth Transfer objectives.

 

Garry E. Meier

Strategic Practice Lead

Ephor Group Inc.

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