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So your enterprise value in a simplified world is cash + debt + equity value. Dividend recap you take equity out and put debt in - no change to enterprise value. When you sell the company, all debt is repaid. Since there is dollar for dollar more debt in the company vs the equity you just returned, you will get less cash upon the sale of the company as an equity holder since you need to repay all the debt first with sale proceeds. No change to the total value of the company though...
Stock deals are 99% of the time on debt-free, cash-free basis. Buyers pay a purchase price based on the EV, seller pays off net debt with proceeds and keeps the rest. Buyer gets a clean balance sheet
I do not know the legal side of the question, so I am unsure about "when" you can do it. But the concept is tha basically you are taking out cash from the firm and distributing it to shareholders, in order to raise that cash you subscribed new debt.
I guess you can sell it afterwards if you want (again, not sure about legal implications) but the Equity Value of the firm went down, but not the enterprise value, since the Asset value is now backed by more debt than before.
As others have said, it’s a dividend (less equity) that’s funded by new debt (more debt). So just a shift in the capital structure but no change to EV. Allows PEs to return proceeds early (+IRR) and can be a way to sometimes salvage / hedge underperforming portcos. At the time of sale, more of the EV will go towards paying down debt so the PE will keep less (but this is obviously offset by the dividend)
Stock deal would be most common. And yeah I have personally never seen a deal that isn’t cash free debt free. Buyers want clean balance sheets and as others have said there are typically change of control considerations with any debt
Thanks by the way!