Seller Rollover Equity

December 12, 2025

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

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 an intermediary
from Spring Hill College in Dallas, TX, USA

High rollover is rationale when there is credible value creation ahead --that might be a roll-up strategy, geo expansions, growth capital ---basically when the buyer has proven beyond a dount that they can scale better than you. In those cases rollover may outperform cash-out. But I'd say the downsides are there more often than not. It's like everything else, the elements needs full evaluation and negotiation. So the formula is Cash is king, rollover capital is preferred with BOTH credible seller growth results and scalability proof, all sellers equity requires strong protections. What I would recommend if you feel comfortable going down that path, please make sure you negotiate what I call asymmetric protections (i.e. preferred equity, capitalization rules to live by, dilution protections, etc.) to assure that downline you have the recourse to win with changes down the road and make a second bite of the apple really work.

Reply by a lender
in Falmouth, MA, USA

^redacted‌ I’d begin by asking, what’s the main goal or reason behind such a high equity rollover? We don't see these high rollovers. There must be a level of alignment and chemistry here since you’re essentially entering into a partnership. Do you feel this acquisition fits within your overall investment thesis? When you think about growing your portfolio, how do you see this impacting that growth? If the deal requires SBA financing, would they be open to guaranteeing it now or even in the future to secure more working capital? These are just a few questions to consider...

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