Curious to learn about seller rollover equity economics.

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by a searcher from INSEAD
in Calgary, AB, Canada

1d ago

Curious to learn about seller rollover equity economics.

HI All, I am looking to learn various scenarios when a seller want to rollover equity. I would love to hear examples of how buyers have structered seller equity rollovers. For simple math purposes: Purchase price: $2m Target debt 60% = $1.2m VTB: 20% = $400k Equity: 20% = $400k If Seller wants to rollover 10% Do they put in $200k? What are some other ways to structure seller retaining some equity and tips please. I am looking at a deal and trying to figure out how to structure. Appreciate any feedback.

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reply by a searcher 1d ago
from University of Oxford in Calgary, AB, Canada

There's different ways to do / think about it between 10% for $200k, and 10% for $40k (i.e. 10% of the $400k total equity). Depends on what you're trying to achieve, how competitive the process is, where the rest of your equity is coming from, etc.

reply by a searcher 19h ago
from INSEAD in Minneapolis, MN, USA

The framing of the question is very simplistic. Answering it would require making a lot of assumptions about the rest of the deal structure and the company itself. Better to have an M&A lawyer talk through it with you.