Achieving Liquidity a Pain in the Asset? Consider a Single Asset Recapitalization

There has been a recent and notable uptick in single asset recapitalizations—transactions in which a fund sells its interest in a portfolio investment to another entity controlled by the same sponsor. These transactions are valuable tools for sponsors looking for ways to provide liquidity to existing investors without fully divesting from a portfolio company they like. This practice note contains a brief explanation of what these deals are, and why a sponsor and its fund investors may want to pursue a single asset recap. It discusses typical structures for these deals, certain considerations sponsors will want to keep in mind, strategies to reduce deal execution risk, and key tax considerations.

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