Certified Exit Planning Advisor (CEPA) Practice Test

A management buy-in is not an example of minority recapitalization, making the statement false.

To understand this distinction, it’s important to consider the definitions of both terms. A management buy-in typically involves an external management team purchasing a controlling interest in a company, thereby gaining operational control. This means that the management team is acquiring a significant portion, if not all, of the equity, which gives them substantial decision-making power.

On the other hand, minority recapitalization refers to a transaction in which an investor acquires a minority stake in a company, often alongside the current owners retaining majority ownership. This process usually involves restructuring the company's capital but does not change who has control of the business. The key point is that in a minority recapitalization, the existing owners maintain their controlling interest, whereas a management buy-in results in a shift in control.

Thus, since a management buy-in involves gaining control rather than a minority interest, it does not fit the definition of minority recapitalization.