Seller Rollover Equity

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by a searcher from Rice University - Jesse H. Jones Graduate School of Business
in Austin, TX, USA

6mos ago

Seller Rollover Equity

Does anyone have experience with a successfully closed deal that was structured in a way that the Seller provided a higher percentage of rollover equity relative to market? 30%-40%? Would love to hear your experience. Was the Seller younger, in need of growth capital, etc? Feel free to exclude any confidential information. Thank you.

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reply by a searcher 6mos ago
from Duke University in New York, NY, USA

It depends on the terms of the offer. If terms specify that the rollover is structured on the same economic basis as the buyer’s new equity contributions (as in most cases) then the seller will also benefit from the debt and own 50% of NewCo.

reply by an intermediary 6mos ago
from The University of Chicago in Chicago, IL, USA

^redacted‌ I agree with you. Seller equity % should be pari passu with that of buyer. However, seller % needs adjustment b/c buyer gives PG on total borrowing. Usually this is not clarified to seller early b/c many buyers think 10% of price is 10% equity. Often seller/advisors discover this at the purchase agreement level and the deal falls apart.