What is Rollover Equity?
Understanding how a buyer plans to structure the purchase of your business is key. Many private equity (“PE”) acquisitions feature what is referred to as rollover equity. Rollover equity arises when certain equity holders of the target company roll a portion of their ownership stake into the new equity capital structure put in place by the acquiring PE firm. This is a form of purchase price payment in lieu of cash proceeds and is attractive to PE firms because it aligns interests with those rolling equity. Rollover equity is beneficial to target company ownership because it allows them to receive partial liquidity for their ownership interests while continuing to participate in further upside. Further, rolling equity may provide tax benefits to target company ownership.
The concept of rollover equity is generally straightforward, however, understanding all of the terms and consequences often requires a detailed analysis. We welcome the opportunity to discuss various transaction structures and rollover equity with you in more detail. Please reach out to our Vice President, Charlie Zalud, to learn about our partnership approach and how we seek to align interests when structuring acquisitions.
Charles Zalud, Vice President