Structured Secondary
A secondary transaction with special terms like forward contracts, SPVs, or profit-sharing arrangements.
Definition
A structured secondary is a secondary transaction that uses more complex financial structures beyond a simple share purchase. Common structures include SPVs (special purpose vehicles) that pool multiple sellers, forward contracts that delay settlement, and profit-sharing arrangements where the buyer shares upside above a certain price. These structures are used to work around transfer restrictions, pool small lots, or provide seller protection.
Why it matters
If you are offered a structured secondary deal, read the terms carefully. Some structures include provisions where the buyer takes a large share of any upside above a certain price, or where you retain downside risk. The complexity can hide unfavorable terms.
Example
A secondary firm creates an SPV to purchase shares from 20 employees. Instead of direct transfers, the SPV buys the shares and issues interests to the buyer. The employees receive cash, but the SPV structure means the company only sees one shareholder (the SPV) on its cap table.