What happens to seller equity roll?

searcher profile

July 22, 2020

by a searcher from Boston College in Kansas City, MO, USA

The seller wants to retain 45% of equity post-close.

As we finalize deal terms, we are discussing whether their seller equity will be diluted by sponsor promote and mgmt options.

Understand every deal is different...but is it typical or atypical to dilute the sellers' rolled equity with sponsor promote and mgmt options?

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commentor profile
Reply by a searcher
from Massachusetts Institute of Technology in New York, NY, USA
Dilution would be normal given the promote and mgt options pool. Keeping it fair and transparent is usually the best way to go and avoids issues down the road
commentor profile
Reply by an investor
from University of Western Ontario in Toronto, ON, Canada
Everyone takes dilution. No other way to do it fairly - otherwise new equity wb taking 2x dilution on their piece.
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