Jurisdiction(s):
United Kingdom

Key definition

Secondary buyout definition

What does Secondary buyout mean? A secondary buyout is a private equity exit in which a portfolio company (or a controlling stake in it) is sold by one financial sponsor to another sponsor, rather than to a trade buyer or through an IPO. It is a descriptive market term, not defined in legislation or case law, and is used consistently across England & Wales, Scotland, Northern Ireland and Ireland. It can also refer to a sale of a minority stake, for example where one venture capital firm transfers its holding to another. Key legal features typically include: a share sale (often 100%) under a...

Secondary buyouts: UK tax considerations for management—restricted securities, CGT rollover/holdover, QCBs vs non-QCBs, BADR, PAYE/NICs, performance ratchets, earn-outs, HMRC clearances

Published by a LexisNexis Tax expert

Practice notes

A Secondary buyout (SBO)

A secondary buyout (SBO) occurs when Private equity finances the purchase of a company that has already undergone a prior buyout. They provide one route for private equity funds to realise and exit an existing buyout position. In an SBO the current private equity house sells out, yet the target's management typically remains in post following completion, albeit some managers may depart and be replaced, or, more rarely, a wholesale change of management may occur. Managers who continue are usually required to sell the interests they acquired in the target vehicle under the earlier buyout, receiving consideration from the new private equity backer. Accordingly, continuing managers dispose of the interests they previously acquired in the target vehicle and accept the consideration proposed by the incoming investor. They then participate, to some extent, by acquiring interests in the vehicle used to implement the SBO. At least in part, this entails the team taking a stake in the new SBO acquisition vehicle. This Practice Note reviews the principal UK tax implications for those individuals. If, instead, a fresh management team is installed, the tax analysis broadly mirrors that seen for management in a management buyout (MBO). For further detail on...

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Web page updated on 21/05/2026

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