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. Employee Buyout - EBO

    A restructuring strategy in which employees buy a majority stake ...
  2. Reverse Leveraged Buyout

    The offering of shares to the public by a company that was taken ...
  3. Institutional Buyout - IBO

    When an institutional investor, such as a private equity firm ...
  4. Bust-Up Takeover

    A corporate buyout in which the acquirer sells off a piece of ...
  5. Secondary Market

    A market where investors purchase securities or assets from other ...
  6. Buyout

    The purchase of a company's shares in which the acquiring party ...
Related Articles
  1. Insurance

    A Primer On Private Equity

    Private equity investing is becoming more accessible for individual investors; find out how you can get involved.
  2. Insights

    10 Most Famous Leveraged Buyouts

    Learn about the boldest, riskiest leveraged buyouts in history and how they either become famous for failing miserably or making billions.
  3. Investing

    Effects Of Interest Rate Hikes On Private Equity

    Private Equity firms would be wise to lock in current interest rates on their debt payments in anticipation of rate hikes.
  4. Investing

    Comparing Primary And Secondary Capital Markets

    In the primary capital market, investors buy directly from the issuing company. In the secondary market, investors trade securities among themselves.
  5. Retirement

    Buyout Offer? 12 Ways to Tell If It’s Good

    When you are presented with a package, take a close look at these elements – and be sure to negotiate, if possible.
  6. Investing

    The Biggest Private Equity Firms in New York City

    Discover the top four largest private equity firms, including Goldman Sachs, headquartered in New York City, as ranked by total assets raised since 2010.
  7. Investing

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  8. Investing

    What's a Secondary Offering?

    A secondary offering is the issuance of new stock from a company that has already made its initial public offering.
  9. Investing

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  10. Investing

    World's Top 10 Private Equity Firms (APO, BX)

    Obtain important information about the world's top ten private equity firms ranked as of 2015, including their investment focus and portfolio assets.
RELATED FAQS
  1. How is a leveraged buyout different from a buyout?

    Learn about leveraged buyouts and circumstances under which an acquiring company wishes to pursue a buyout funded mostly ... Read Answer >>
  2. How does a company decide whether it wants to engage in a leveraged buyout of another ...

    Learn how leveraged buyouts can be profitable by taking companies private, and understand why the debt loads in these deals ... Read Answer >>
  3. What constitutes a secondary market?

    Find out what constitutes a secondary market, and learn why that term can be applied far more broadly than you might initially ... Read Answer >>
  4. Why do we need a secondary market?

    Find out why secondary markets play a crucial role in economic activity by promoting efficiency, safety, information and ... Read Answer >>
  5. How does the privatization of a publicly traded company work?

    Find out how a publicly traded company can privatize and remove itself from listed stock exchanges and out from under the ... Read Answer >>
Hot Definitions
  1. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  2. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  3. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  4. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Four Percent Rule

    A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule ...
Trading Center