Secondary transactions and right of first refusal (ROFR)

By Unicorn Private Research. Published and last updated 2026-09-20.

Key takeaways

A secondary transaction is a sale of existing shares, not new shares issued by the company.
A ROFR lets the company or existing investors buy the shares on the same terms instead of the outside buyer.
Board approval, co-sale rights and information rights also affect whether a sale can close.
Specialized execution is needed to find genuine sellers and structure a valid transfer.

In a secondary transaction, an existing shareholder sells shares to a new buyer. The company does not receive the proceeds. In private companies the sale is almost never a simple trade, because the company and its investors hold contractual rights over the transfer.

The steps of a typical secondary sale

Identify a seller who holds shares and is allowed to sell them, such as an early employee, a founder or an early fund.
Agree price and terms, usually anchored to the last funding round or to recent secondary transactions.
Notify the company, which reviews the transfer and may exercise its right of first refusal.
Obtain any board approval and confirm that co-sale rights of other holders have been respected or waived.
Sign the transfer documents and settle payment.
Update the company's cap table so that the buyer is recorded as the holder.

What is a right of first refusal?

A ROFR gives the company, and sometimes its major investors, the right to buy the shares on the same terms as the proposed sale. If the right is exercised, the outside buyer does not get the shares. This is one of the main reasons private deals can be delayed, repriced or cancelled.

Other restrictions to check

Transfer approval by the board or by a majority of preferred holders.
Co-sale rights that let other holders sell alongside the seller.
Lock-up and market stand-off clauses that apply around an IPO.
Limits on which entities may hold shares, including rules on investor qualification.

Why execution matters

Identifying real sellers, negotiating terms and structuring the agreement each require specific expertise. Errors can invalidate a transfer or leave the buyer with fewer rights than expected, which is why this market is dominated by specialists.