Secondary Buyout

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.