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A leverage recapitalization involves a partial sale of a business, valuing it at a higher multiple than its current worth. In this scenario, with a business earning five million dollars valued at six times, it becomes worth thirty million dollars with zero debt. To obtain thirty million in equity, 22 million is received in cash and 8 million in stock. This capital is financed by a bank loaning 13 million and a private equity group contributing nine million. The funding structure will impact ownership and determine the success of the recapitalization.
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