Tax on secondary buyouts—background
Tax on secondary buyouts—background

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Tax on secondary buyouts—background
  • What is a secondary buyout?
  • How is a secondary buyout structured?
  • How is a secondary buyout financed?
  • What consideration is provided to the management team?
  • What additional issues need to be considered in a secondary buyout?
  • What steps are involved in a secondary buyout?
  • What are the options for exit?

The key attraction of private equity investment for investors and shareholders (including management) is the potential for realising a significant return on exit. A number of exit routes are available with the most common being trade sale, secondary buyout (SBO) and flotation. The option chosen will ultimately depend on factors such as the appetite of public markets for a flotation of the business and the existence or otherwise of any willing buyers for the business. Management may also have significant input and may prefer to seek further private equity investment through an SBO if the business model and general market conditions suit.

This Practice Note provides tax lawyers with some basic background information about SBOs, by answering the following questions:

  1. what is a secondary buyout?

  2. how is a secondary buyout structured?

  3. how is a secondary buyout financed?

  4. what consideration is provided to the management team?

  5. what additional issues need to be considered in a secondary buyout?

  6. what steps are involved in a secondary buyout?, and

  7. what are the options for exit?

For a summary of the tax issues arising for the UK management team on an SBO, see Practice Note: Secondary buyouts—tax issues for management.

For a detailed analysis of the income tax issues arising for the UK management team on an SBO, see Practice Note: Secondary buyouts—income tax issues for the management