Secondary Sale

A marketplace where existing shareholders in private companies — typically employees, early investors, or founders — can sell their ownership stakes to new buyers before an IPO or trade sale. Secondary markets for private shares have grown significantly, with platforms such as Forge Global and Nasdaq Private Market facilitating transactions that provide liquidity and price discovery for otherwise illiquid private company equity.

The sale of a company to a strategic buyer, typically another company in the same or adjacent industry. Trade sales are the most common exit route for venture-backed and private equity-backed businesses and often command premium valuations due to strategic synergies.

A private equity transaction in which one PE fund sells a portfolio company to another PE fund, rather than to a strategic buyer or through an IPO. Secondary buyouts have become the most common PE exit route, accounting for over 50% of European PE exits in recent years.

The reduction in existing shareholders' ownership percentage when a company issues new shares, typically during a fundraising round. Dilution is an expected part of growth financing, but founders and early investors monitor it closely to protect their economic interest.

A restructuring of a company's capital structure, typically involving a significant change in the mix of debt and equity, without changing the company's total enterprise value. In private equity, dividend recapitalisations (issuing new debt to fund a special dividend to equity holders) are a common mechanism for returning capital to investors prior to exit.

The contractual right of existing shareholders to participate in future funding rounds on a pro-rata basis, maintaining their ownership percentage. Pre-emption rights protect early investors from dilution and are a standard provision in shareholders' agreements.

The planned method by which founders or investors intend to realise the value of their investment. Common exit routes include trade sale (acquisition), IPO, secondary sale, or management buyout.

A term in a venture capital or private equity investment that determines the order and amount in which investors are paid before other shareholders in a liquidation event (sale, wind-down, or IPO). Common structures include 1x non-participating and 1x participating preferences.

What is a co-sale right (tag-along right for shareholders)?

Co-sale rights allow shareholders to participate in a sale of the company on the same terms negotiated by majority shareholders, preventing discrimination against minorities.

What is a recap (recapitalisation) and why do founders propose them?

A recap allows founders and early investors to sell a portion of their shares to new investors without an exit, providing partial liquidity before the full company exits.

What is a right of first refusal (ROFR) and how does it affect secondary sales?

ROFR gives the company or other shareholders the right to purchase shares before a shareholder can sell them to an external buyer, preserving cap table control.