An equity rollover is an arrangement where the selling owner reinvests a portion of the sale proceeds into the acquiring entity, retaining an equity stake in the business post-closing alongside the new owner.
Equity rollovers are most common in private equity transactions. The PE firm acquires a controlling interest, and the selling owner rolls a defined percentage of their proceeds, typically 10 to 30 percent, into shares of the new holding entity. The owner remains a minority investor with an economic interest in the business’s continued performance and the eventual exit the PE firm will execute, typically three to five years post-acquisition.
For sellers, the rollover represents a second bite of the apple, the opportunity to participate in value creation under the PE firm’s ownership, which often includes operational improvements, add-on acquisitions, and a more aggressive growth strategy than the seller could have pursued independently. The risk is that the second exit depends on circumstances the seller no longer controls: the PE firm’s investment thesis, market conditions at the time of exit, and the performance of the business under new management.
See also: Strategic vs Financial Buyer · Deal Structure · EarnoutAn equity rollover is a commitment to a second transaction. Understanding the terms of that commitment matters as much as the first deal. See how Wefinx approaches exit planning.