Rollover Equity
When sellers reinvest a portion of their proceeds into the acquiring entity, sharing in future upside alongside the new owner.
Full definition
Rollover equity is the portion of a seller's proceeds that stays in the business as equity in the post-close entity rather than cash at close. Common in PE acquisitions, rollover sizes range from 10% to 40% of total consideration. Sellers benefit from the 'second bite of the apple' on the post-close growth thesis. Buyers (especially PE) like rollover because it aligns founder incentives and reduces day-one cash needs. Rollovers require careful structuring around governance, exit timing, drag and tag rights, and put/call mechanics. A founder taking rollover should treat it as a real investment decision, not just a deal sweetener.
Related terms
A non-binding (mostly) document that outlines the proposed terms of an M&A transaction. Triggers exclusivity and detailed diligence.
Ratios of enterprise value to a financial metric (revenue, EBITDA, ARR) used to value M&A transactions by comparison.
A portion of the purchase price contingent on the acquired company hitting specific financial or operational milestones after closing.
Have a question this glossary did not answer?
Lane responds to founder questions personally. The first conversation is free and confidential.
Ask Lane