Can you compare a dividend recap to a partial exit via secondary share sale?

How to answer

Both achieve partial return of capital, but through different mechanisms. A dividend recap adds debt to the company's balance sheet (increasing financial risk) while the sponsor retains 100% ownership. A partial secondary sale (selling a minority stake to another investor or in the public market via IPO) reduces the sponsor's ownership percentage but does not increase the company's leverage. The secondary sale may also bring in a new investor with different perspectives or capabilities. PE firms choose between them based on credit market conditions, company leverage capacity, desired ownership retention, and whether bringing in a new equity partner adds strategic value.

Key idea: Recap adds debt but keeps ownership; secondary sale reduces ownership but keeps leverage stable.