What Is A Secondary Transaction & Why Are Founders Loving It? 

UK entrepreneurs are altering the way in which they money out of their companies, as financial uncertainty makes typical exit methods much less engaging, knowledge finds.

A brand new report from Charles Stanley, developed with Beauhurst, exhibits that extra founders at the moment are selecting to promote a part of their stake to buyers in a secondary transaction. This enables them to achieve some monetary return with out totally relinquishing management of the enterprise.

Consultants say the shift is being pushed by slower development, excessive rates of interest, and a more durable funding local weather within the wake of the pandemic.

Exit quantity stays above pandemic ranges

In keeping with the complete Charles Stanley Exits within the UK report, exit exercise within the UK stays elevated above pre-pandemic ranges. Since 2015, 7,859 high-growth UK firms have exited, with nearly 40% of exercise occurring in simply the final two and a half years.

Predictably, acquisitions account for almost all of exits recorded up to now ten years. Peaking in 2021, a complete of 1,110 buyouts happened as extra entrepreneurs bought up store.

Enterprise buying has since remained sturdy, nevertheless. 2024 noticed the second-highest variety of acquisitions throughout the interval, with 1,069.

Many of those have been splashed throughout the enterprise headlines this yr. Quick-growth startups snapped up in 2025 embody health app Runna, which was acquired by Strava in April, and the eco-conscious beauty model Wild, which was purchased by Unilever in March.

In each instances, the corporations had been acquired by company patrons (firms making strategic purchases) fairly than by monetary patrons (buyers hoping to make a return). In 2024, 85.7% of acquisitions had been by corporates, whereas 14.3% had been carried out by buyers.

What’s a secondary transaction?

Acquisitions may rule the roost, however founder-led secondary transactions have turn into extra outstanding since 2015. Rising from 650, they peaked at 1,799 in 2022.

Secondary transactions are usually not technically an exit technique. They’re a liquidity occasion for each founders and buyers, and sometimes happen throughout later funding rounds, not simply at exit stage. However they’re like acquisitions in that they permit each events to money out.

On this technique, founders promote their shares in a personal firm to a brand new investor, fairly than the corporate issuing new shares to boost cash.

This methodology allows founders (or early shareholders) to entry capital with out a full exit. Plus, as they solely lose a part of their stake, the founder can nonetheless retain management over the corporate. This could possibly be why secondary transactions are more and more considered as an alternative to full exits.

Cliadhna Regulation, Head of Direct & Skilled Gross sales at Charles Stanley, feedback: “Exits are now not confined to an IPO or acquisition, and founder secondary transactions have emerged as a key characteristic of the trendy exit surroundings.

“These offers present liquidity with out relinquishing management, providing a versatile answer for founders and buyers as firms proceed to stay personal for longer.”

You’re not imagining it, IPOs are declining

One other exit technique that permits the proprietor to take care of management over the enterprise is an Preliminary Public Providing or IPO. To jog your reminiscence, IPOs contain taking a personal firm public by issuing shares to the general public for the primary time.

2021 was an distinctive yr for the IPO market within the UK, each when it comes to the variety of firms itemizing and the quantity raised. However the present state of the market leaves a lot to be desired. As Charles Stanley knowledge exhibits, UK IPOs have reverted to traditionally low ranges.

Q1 2025 has solely seen 5 IPOs, elevating a mixed £74.7m in proceeds. Excessive-profile tech firms comparable to Simply Eat and Sensible have additionally each shunned the UK market in latest months, with the previous transferring to Amsterdam and the latter to New York.

In Might, one of many London Inventory Alternate’s greatest underperformers Deliveroo, was bought by US rival DoorDash after it struggled to take care of profitability in previous blighty.

That founders are more and more turning away from conventional exits comparable to IPOs tells us that many are sensing the dangers outweigh the rewards in at the moment’s economic system.

With public markets much less receptive, secondary transactions supply a compelling various for founders to increase their money circulation with out exposing themselves to market volatility.