Seller Equity Rollover Distribution Terms

August 30, 2024
by a searcher in Boston, MA, USA
Hi All,
Working on a partial buyout deal where the seller will retain 15% equity in the business. He'd like to agree on share distribution terms pre-LOI.
For those with experience with rollover equity, how have you handled distributions? Do sellers typically have rights to 15% of FCF after debt service and Capex (i.e required annual distributions), only have rights to 15% of distributions when the buyer chooses to take distributions themselves, or some other qualifier (i.e. only gets distributions if revenue or profit hits X threshold)?
Thank you!
from The University of North Carolina at Chapel Hill in Atlanta, GA, USA
from Concordia University in Milwaukee, WI, USA