Rollover Equity
When the seller keeps a piece of the business by reinvesting some of the sale proceeds into the new ownership structure.
Rollover equity is the portion of your sale proceeds you reinvest into the buyer's new ownership entity instead of taking in cash at closing. Instead of selling 100% of the business and walking away, you sell, say, 80% — and "roll over" the other 20% into the buyer's holding company, becoming a minority shareholder of the new entity. You get cash for most of the deal up front, plus you keep equity exposure to whatever the business becomes under the new owner. Rollover equity is most common in private equity transactions, especially when the PE firm wants the seller to stay involved through a transition or wants the seller to share in the upside if their growth plan works.
Rollover equity is the second bite at the apple — the part of your sale you keep invested in the buyer's new ownership entity, with all the upside and all the downside that comes with being a minority shareholder.
PE buyers love rollover equity because it lowers their cash requirement and keeps the seller invested in the success of the business after closing.
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