Secondary Buyout

AAA

DEFINITION of 'Secondary Buyout'

A type of leveraged buyout in which a financial sponsor or private equity firm sells its investment in a company to another financial sponsor or private equity firm, thereby ending its involvement with the company in question. Historically speaking, secondary buyouts are often perceived to be "panic" sales and, thus, are sometimes hard to consummate. Secondary buyouts are not the same as secondary market purchases, or "secondaries," which typically involve the acquisition of entire portfolios of assets.

BREAKING DOWN 'Secondary Buyout'

Part of the attraction of a secondary buyout is the instant liquidity it offers. Secondary buyouts often make sense when the selling firm has already realized significant gains from the investment or when the second private equity firm can have greater benefits to the firm being bought and sold.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Takeover Artist

    An investor or company whose primary goal is to identify companies ...
  3. Private Equity

    Equity capital that is not quoted on a public exchange. Private ...
  4. Flipping

    A type of real estate investment strategy in which an investor ...
  5. Takeover Bid

    A type of corporate action in which an acquiring company makes ...
  6. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
Related Articles
  1. Entrepreneurship

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  2. Entrepreneurship

    The Giants Of Finance: Andrew Carnegie

    Though not as well-remembered as some of his contemporaries, Andrew Carnegie's legacy is strong and moralistic.
  3. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  4. Retirement

    How The Big Boys Buy

    Learn what those in-the-know look for when acquiring a company.
  5. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  6. Mutual Funds & ETFs

    ETF Analysis: Direxion Daily Financial Bull 3X

    Obtain a thorough review and analysis of the Direxion Daily Financial Bull 3X fund, a leveraged ETF that tracks the performance of the financial sector.
  7. Investing Basics

    5 Tips For Investing In IPOs

    It’s not easy to profit from IPO​s, but the money is there.
  8. Investing Basics

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  9. Entrepreneurship

    Top 5 Startups that Emerged in London

    Learn why London's startup scene is so prolific, and identify some of the hottest companies emerging from this scene as of mid-2015.
  10. Professionals

    Tips on Building a Resume for a Private Equity Job

    Trying to land a job in the coveted private equity sector? Ensure your resume meets the stringent PE job requirements with these important tips.
RELATED FAQS
  1. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  2. How do you find the break-even point using a payback period?

    It does not make sense to find the breakeven point using a company's payback period. A company's payback period is concerned ... Read Full Answer >>
  3. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  4. What is considered a reasonable interest rate for a syndicated loan?

    A 2010 survey of syndicated loans found an average interest rate of 7.9%. However, the majority of syndicated loans are floating ... Read Full Answer >>
  5. How strong are the barriers to entry for new companies in the telecommunications ...

    The barriers to entry for new companies in the telecommunications sector are very strong and primarily revolve around the ... Read Full Answer >>
  6. Are there leveraged ETFs that follow the retail sector?

    There are many exchange-traded funds (ETFs) that track the retail sector or elements of the retail sector, and some of those ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!