leveraged-recapitalization-method

Vocabulary Word

Definition

'Leveraged recapitalization method' is a strategy used by companies to change their capital structure by borrowing money to repurchase outstanding stock. This increases the company's debt but decreases its equity.

Examples in Different Contexts

For financial strategy, the 'leveraged recapitalization method' is used to reorganize a company’s financial structure by replacing equity with debt to take advantage of tax deductions. A financial strategist might say, 'Implementing a leveraged recapitalization method will reduce our taxable income through interest deductions.'

Practice Scenarios

Business

Scenario:

Our company's shares are undervalued and there's a risk of a hostile takeover. We need to construct a solid financial strategy.

Response:

Would implementing a leveraged recapitalization method be an effective strategy to boost our share price and deter potential takeovers?

Consulting

Scenario:

Our client is struggling to thwart a potential hostile takeover. They are considering various strategic defenses and need our recommendations.

Response:

I'd recommend proposing the leveraged recapitalization method as a financial maneuver. The increased debt could serve to discourage potential acquirers.