What is a secondary buyout?

What is a secondary buyout?

• A. Sale to another financial buyer
• B. Sale to a strategic acquirer
• C. IPO
• D. Recapitalization

Answer: (A)

In private equity, a secondary buyout means selling a portfolio company owned by one sponsor to another financial sponsor. This is an exit from one PE fund to another PE fund, rather than to a corporate strategic buyer or to the public markets. It’s different from a sale to a strategic acquirer because the buyer is another financial sponsor, not a company looking to integrate the business. It’s not an IPO, which would list the company on public markets, and it’s not a recapitalization, which involves altering the company’s capital structure without changing ownership to a different sponsor.

In private equity, a secondary buyout means selling a portfolio company owned by one sponsor to another financial sponsor. This is an exit from one PE fund to another PE fund, rather than to a corporate strategic buyer or to the public markets. It’s different from a sale to a strategic acquirer because the buyer is another financial sponsor, not a company looking to integrate the business. It’s not an IPO, which would list the company on public markets, and it’s not a recapitalization, which involves altering the company’s capital structure without changing ownership to a different sponsor.