Independent Sponsor Dividend Recapitalization in Cybersecurity Services
Structuring Dividend Recapitalization on cybersecurity services deals, with the structure protection and capital connectivity an independent sponsor actually needs.
Cybersecurity Services deals in the lower middle market run a specific playbook. Dividend Recapitalization is where the structure either holds or starts to leak.
The typical cybersecurity services platform sits at $10M to $130M EV with EBITDA in the $2.5M to $22M range. The thesis runs on MSSP or specialty consulting platform. Cleared workforce is the moat. Cleared workforce can also be the deal-killer in CFIUS reviews.
How Dividend Recapitalization actually gets structured.
Time the recap when leverage has come down and EBITDA has grown.
Structure the new senior debt with room for ongoing operations and add-ons.
Confirm that the LP waterfall recognizes the distribution as recap, not exit.
Coordinate tax treatment of the distribution with the LPs in advance.
In cybersecurity services, layer in FSO succession plan in place as part of the Dividend Recapitalization workstream.
Recapping too early. Lenders price it; LPs feel it; the next deal cost goes up.
"Recaps are a tool, not a habit. Use them when the operating story supports them."Jason Powell · Dividend Recapitalization
The deal is one thing. The capital that opens up after close is another.
Most independent sponsors solve the closing capital and then run into the post-close capital problem alone. The capital markets relationships that matter at month 18 are part of this practice.
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Dividend Recapitalization for Cybersecurity Services, on independent sponsor terms.
Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.