What are the most common carry structure for rollups & holdcos?

April 30, 2025

by a searcher in London, UK

Hi guys, I am working on a rollup/holdco model, if anybody is working on that too or has experience in buy and build by independent sponsors, what is the most common promote structure you have encountered? thanks a lot!

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Reply by a searcher
from University of Virginia in Los Angeles, CA, USA

There is no one size fits all for these. The more it looks like an independent sponsor deal (i.e. you have a live deal) the better terms you can negotiate for. Usually there is a pref of 8-12%. Carry is usually 0-20 or 25% on hurdles between 2-4 or 5x MOIC and catchups at each hurdle. Those hurdles usually have IRR requirements as well. Outsized returns (6-10x+ MOIC) can get you to 30-35% carry. Anything above that would be well above market. Governance ranges a good bit. Usually, you want a good number of veto rights while the investors have control over a majority of board seats. Situations where you own the board and they have veto rights are uncommon but exist with a concentrated cap table - think family office. There will always be fundamental decisions that require a majority of shareholders to agree. Deal fees are more common when you bring the initial deal. Several studies are available on how those work in independent sponsor transactions and I'd encourage you to google them. In indefinite hold structures you can often get a management fee on top of salary. >3% would probably be high there. Most of all I'd encourage you not to anchor to anything you hear. The people with the best terms are the most likely to share them. Pick the right capital partners, understand what matters to them, and design something that works for both of you.

Reply by an intermediary
from University of Wisconsin in Lawrence, KS, USA

Thanks Luke. Steve, roll ups are our specialty. Have done several over the decades and have just launched a new one recently. I would be happy to schedule a time to go over this question as well as others if you wish. We can probably help you streamline what you are doing. In any event, my email is redacted

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