Definition of Bought Out Deal

A bought out deal is a process in which a company offers securities or shares to the public, through a sponsor. The sponsor can be a bank, any financial institution or even an individual. This method can be opted for only by private companies, as per SEBI rules.

Points to remember:

• Terms of this method are agreed upon by the company and the sponsors.
• This method involves three parties: the company’s promoters, the sponsors and the co-sponsors.
• A bought out deal helps the company in saving time as well as the costs involved in a public issue.