Secondary buyout (sponsor-to-sponsor)
A sale from one private equity firm to another, also called a sponsor-to-sponsor deal. One fund’s exit is the next fund’s entry, and the company keeps a financial owner.
Secondary buyout (sponsor-to-sponsor) in round numbers
Hypothetical, US$ millions: a sponsor sells a company to another sponsor at 8.0 times trailing-twelve-month earnings before interest, taxes, depreciation and amortization (EBITDA) of 10.6. Enterprise value is 8.0 × 10.6 = 84.8. Subtracting net debt at the sale date of 9.0 gives equity proceeds of 75.8, assuming no other equity-value adjustments. If the selling investor originally invested 27.1 and receives all 75.8, its gross equity multiple is 75.8 ÷ 27.1 ≈ 2.8×. Assume no other contributions, distributions, fees, or dilution. This multiple is not an annual return.
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| Route | Buyer or investors | Possible implications |
|---|---|---|
| Trade sale | Strategic buyer | Integration and management roles depend on the deal. |
| Secondary buyout | Another private equity sponsor | Management retention and new equity incentives are negotiated. |
| IPO | Public-market investors | Often partial liquidity at first; public reporting and sale restrictions may apply. |
Terms Related to Secondary buyout (sponsor-to-sponsor)
Exit (harvest) · Trade sale · IPO · Sponsor · MOIC · All of the glossary