The Rollover Equity Decision - Betting on the Next Buyer

You’ve built your company for fifteen years, navigated three recessions, and finally attracted a private equity buyer offering $18 million. Then comes the twist: they want you to “roll” 25% of your proceeds into the new entity. Suddenly, you’re not just selling—you’re being asked to bet $4.5 million on a buyer you met six months ago. This rollover equity decision deserves the same rigorous analysis you’d apply to any multi-million dollar investment, because that’s exactly what it is.

Executive Summary

Rollover equity has become one of the most consequential and least understood elements of middle-market M&A transactions, particularly in private equity buyouts and buy-and-build strategies. For business owners selling to private equity firms or strategic acquirers, the rollover equity decision often determines whether an exit creates generational wealth or becomes a cautionary tale. This guide examines the mechanics of rollover equity structures, identifies the circumstances where continued ownership creates genuine value versus those where it represents forced risk, and provides practical frameworks for evaluating rollover opportunities.

The critical insight many sellers miss: rollover equity changes the nature of your transaction from a liquidity event to a partnership formation. When structured properly with the right buyer—and when two conditions are met (your involvement genuinely drives value creation the sponsor cannot achieve without you, and the sponsor’s strategy is sound and well-executed)—rollover may generate returns that exceed your initial sale proceeds under favorable conditions. When accepted passively or evaluated superficially, it can tie up significant capital in situations where you have limited control and misaligned incentives. Even sponsors with strong historical track records face significant performance variance, and past results may not predict future outcomes, especially across different market cycles.

We’ll look at the financial mechanics, tax implications, governance considerations, and negotiation strategies that determine whether rollover equity serves your interests or primarily benefits your buyer.

Introduction

The rollover equity conversation typically arrives at a pivotal moment in deal negotiations. You’ve agreed on enterprise value, discussed key terms, and begun imagining life after the transaction. Then your buyer—usually a private equity firm—explains that their standard structure requires sellers to reinvest a portion of their proceeds into the post-acquisition company.

For many business owners, this request creates immediate tension. You’ve spent years building a company precisely so you could eventually monetize that value and diversify your personal wealth. Being asked to keep substantial skin in the game can feel counterintuitive—and for some sellers, it raises concerns about whether they’re being asked to subsidize buyer economics rather than participate in genuine upside.

Yet rollover equity has become standard practice in private equity transactions for legitimate reasons. From the buyer’s perspective, rollover ensures alignment between sellers and new owners during critical transition periods. It signals seller confidence in the business’s future prospects. And it reduces the equity check required from the sponsor, improving their fund economics.

From a seller’s perspective, the calculus is more nuanced. Rollover can provide access to a “second bite of the apple”—the opportunity to participate in value creation driven by the buyer’s capital, knowledge, and strategic vision. PE sponsors commonly target returns in the range of 2.0x to 3.0x on their investments over typical five-year holding periods, translating to roughly 15-25% internal rates of return. This compares to diversified portfolios that historically generate 6-9% annualized returns in typical market conditions.

But this comparison requires careful consideration. While PE targets exceed diversified portfolio expectations on a pure return basis, this comparison ignores liquidity risk, concentration risk, and timing risk. Critically, targets are aspirational rather than guaranteed—top-quartile sponsors consistently achieve these returns, while bottom-quartile sponsors may generate modest returns or losses for rollover participants. For sellers with shorter time horizons, greater liquidity needs, or lower risk tolerance, diversified portfolio returns may be superior on a risk-adjusted basis, even when PE returns exceed them in favorable scenarios.

This article provides the analytical framework you need to evaluate rollover equity opportunities rigorously, negotiate terms that protect your interests, and make informed decisions about when rolling makes sense versus when you should push for a clean exit.

Understanding Rollover Equity Mechanics

Rollover equity operates through a straightforward mechanism with complex implications. Rather than receiving cash for your entire ownership stake, you exchange a portion of your shares in the existing company for shares in the new entity that acquires it. This new entity—typically a holding company formed by the buyer—owns your former business along with any debt needed to finance the acquisition.

The percentage of rollover varies significantly across transactions. In our firm’s experience advising middle-market transactions, and consistent with reports from M&A practitioners, private equity buyers typically request rollover ranging from 10% to 40% of seller proceeds, with 20% to 30% being most common in deals involving companies with $25M-$250M in enterprise value. Strategic acquirers pursuing buy-and-build strategies may request larger rollover percentages, sometimes exceeding 50%, as they seek to retain seller knowledge and alignment through aggressive growth phases. These ranges reflect current market conditions as of late 2025 and may shift with credit availability and competitive dynamics.

The Valuation Question

Your rollover stake is typically valued at the same multiple needed to price the overall transaction. If your company sells for 6x EBITDA, your rollover equity enters the new structure at that same valuation. This seems straightforward but creates important implications.

First, you’re entering at the buyer’s basis rather than establishing a new cost basis. If the buyer believes they can improve operations and sell at 8x EBITDA in five years, your rollover participates in that multiple expansion. But if they paid a premium to win the deal and the next buyer pays a lower multiple, your rollover stake bears that contraction.

Second, the capital structure above your equity position matters enormously. Private equity buyers typically finance acquisitions with debt ranging from 3.5x to 5.5x EBITDA in current market conditions, with median amounts around 4.0x-4.5x for deals in the $50M-$250M enterprise value range. This debt amplifies returns on equity when things go well but can eliminate equity value entirely when they don’t. We reference 3x as “conservative” and 5x as “aggressive” relative to current market conditions, though these benchmarks shift with credit cycles.

The Holding Period Reality

Median holding periods for PE investments currently range from four to six years, with five years being typical for middle-market transactions. This varies significantly by fund vintage and strategy—buyout funds may hold longer during challenging exit environments, while growth equity funds targeting specific milestones may exit faster.

Your rollover equity remains illiquid throughout this period. Unlike public market investments you can sell whenever market conditions or personal circumstances dictate, rollover equity converts to cash only when the sponsor decides to exit.

This illiquidity creates planning challenges that extend beyond investment returns. If you need liquidity for other opportunities, estate planning, or unexpected circumstances, your rollover stake provides none. We’ve seen sellers who rolled significant amounts subsequently face situations—medical emergencies, divorce proceedings, once-in-a-lifetime investment opportunities—where that illiquid capital created genuine hardship. Based on our experience, roughly 15-25% of sellers face unexpected liquidity needs over a typical five-year holding period, making this risk meaningful rather than theoretical.

When Rollover Equity Creates Value

Despite its risks, rollover equity genuinely creates value under specific circumstances. Understanding these conditions helps you evaluate whether a particular opportunity merits the ongoing commitment.

Thesis Alignment

Rollover creates maximum value when you genuinely believe in the buyer’s investment thesis and operational capabilities. If a private equity firm plans to consolidate your industry by acquiring competitors and implementing operational improvements you’ve long recognized as valuable, your rollover lets you participate in that value creation with their capital and know-how driving execution.

The key question: Would you invest this money in this buyer’s strategy if you weren’t selling your company? If the answer is genuinely yes—not because you’re caught up in deal momentum but because you’ve rigorously evaluated their approach—rollover can be an attractive investment.

Rollover returns depend entirely on the sponsor’s ability to create value post-close through specific mechanisms: multiple expansion (buying at 6x, exiting at 8x), EBITDA growth (operational improvements, revenue acceleration), debt reduction (debt paydown increasing equity value), or strategic acquisitions (building a platform with synergies). Well-executed investments may generate 2-3x returns on rollover capital. But rollover tied to sponsors who fail to execute generates losses. Evaluating the sponsor’s capability to drive specific value creation is therefore the primary determinant of rollover success—though even this evaluation provides imperfect prediction of actual outcomes.

Favorable Tax Treatment

Rollover equity often qualifies for tax-deferred treatment under Section 351 of the Internal Revenue Code, allowing you to defer capital gains recognition until you ultimately sell your rollover stake. But tax deferral creates value only if your rollover appreciates and you can hold it without forced liquidation. If your rollover stagnates or declines, the deferral benefit evaporates—you defer tax recognition on losses, which provides no economic benefit.

Here’s a simplified illustration of the present-value impact of deferral. Assume a seller rolling $3 million faces a combined federal and state capital gains rate of 35% (typical for high-income taxpayers in high-tax states like California or New York; your actual rate may range from 23.8% in zero-state-tax jurisdictions to 37%+ in high-tax states). If that $3 million were immediately taxed, the seller would net roughly $1.95 million to reinvest. If that $1.95 million doubles over five years to $3.9 million, the after-tax proceeds are roughly $3.2 million. Conversely, if the rollover $3 million doubles to $6 million over five years before tax, the after-tax proceeds are roughly $3.9 million—a meaningful difference. This benefit exists only if (1) the rollover indeed appreciates, and (2) tax rates don’t increase before sale. Model your rollover under base-case, upside, and downside scenarios, calculating after-tax value under each, then decide whether deferral risk is acceptable.

QSBS Eligibility

Rollover shares may qualify as Qualified Small Business Stock if the issuing corporation meets specific requirements. As of 2025, QSBS held for more than five years may be eligible for federal capital gains exclusion up to $10 million or 10x your basis, whichever is greater. These rules are subject to periodic legislative modification, so confirm current availability with your tax advisor at the time of exit.

Operational Synergies You’ll Drive

If your ongoing involvement is genuinely crucial to the sponsor’s investment thesis, rollover can align incentives appropriately. But be realistic about how replaceable you are. If the sponsor’s strategy is primarily operational improvement or multiple arbitrage—and your specific involvement isn’t critical to execution—rollover may represent overclaimed alignment.

Ask directly: “If I don’t stay involved, do your financial projections change materially?” If the answer is no, seller alignment is not a critical value driver, and rollover may not be warranted. This alignment benefits both parties only when your involvement is genuinely value-additive rather than merely a transition convenience the buyer could accomplish without you.

When Rollover Equity Destroys Value

Rollover equity destroys value under conditions that are equally identifiable—but often obscured during deal negotiation when momentum and emotion can cloud judgment.

Concentration Risk You Can’t Afford

If your business represents the vast majority of your net worth, rolling substantial proceeds maintains dangerous concentration. For many sellers, a primary goal of exiting is diversification away from single-asset risk. Rolling 30% keeps nearly a third of your wealth in a single, illiquid investment you no longer control.

We counsel clients to evaluate rollover in the context of their entire financial picture. If rolling $2 million leaves you with $8 million in liquid, diversified assets, the concentration may be acceptable. If it leaves you with $2 million liquid and $2 million rolled, you’ve barely improved your diversification despite completing a major transaction. That said, sellers have diverse motivations—some want to diversify, others want liquidity for new opportunities, others want to reduce operational burden. Evaluate rollover against your specific objectives, not against assumed generic goals.

A critical question to answer before agreeing to any rollover: Can you afford to lose the entire rolled amount without materially impacting your retirement security or lifestyle? If the answer is no, reduce the rollover percentage or increase protections significantly.

Misaligned Investment Horizons

Private equity holding periods don’t respect your personal timeline. If you’re sixty-two and planning to fund retirement from sale proceeds, a seven-year hold that delivers your rollover liquidity when you’re sixty-nine may not align with your needs—regardless of the returns generated.

Similarly, if you’re rolling proceeds you’ve mentally allocated to specific purposes—funding a child’s education, buying a second home, making philanthropic commitments—the uncertainty around timing creates practical problems even if the investment ultimately performs well.

Governance Rights That Don’t Protect You

Governance protections provide real legal and practical value, but they’re not foolproof. A minority shareholder can enforce anti-dilution provisions through litigation, but such enforcement is expensive, time-consuming, and outcomes are uncertain. Tag-along rights ensure exit opportunity but only if you choose to participate.

While minority shareholders theoretically face risks (equity dilution, opportunistic recapitalizations), reputable sponsors have reputational and structural incentives to avoid abusive outcomes. Minority holder disputes are statistically rare in quality sponsor relationships. But your governance provisions should be evaluated assuming worst-case sponsor behavior to ensure adequate protection. View governance protections as meaningful but imperfect safeguards—not guarantees against adverse outcomes.

The most effective governance provisions are those that align sponsor incentives (such as hurdle provisions that prioritize minority returns before sponsors receive distributions) rather than those that rely on litigation for enforcement. Evaluate governance protections with clear-eyed recognition that enforcement requires expensive legal action with uncertain outcomes.

Rollover Evaluation by Context

Industry Considerations

Rollover evaluation varies dramatically by industry. Platform acquisitions in roll-up strategies often benefit from significant seller rollover (30-40%) to drive integration and acquisition velocity. By contrast, acquisition of a stable manufacturing business may require minimal rollover (10-15%) if synergies are primarily operational. Capital-intensive businesses with replacement CAPEX demands have different rollover profiles than asset-light service companies. Founder-dependent businesses (personal services, professional services) have different alignment value than operationally stable manufacturing. Strategic differences in your industry should inform rollover targets.

Transaction Size Matters

This guidance focuses on middle-market transactions, which we define as business sales in the $25M-$250M enterprise value range (typically $10M-$100M+ in revenue). Rollover mechanics scale differently for smaller transactions (where PE debt may be scarce and rollover requests lower) and larger transactions (where sponsor expectations around seller involvement differ and institutional dynamics dominate).

Strategic Buyer Differences

Rollover in strategic deals often reflects buyer intention to retain talent and relationships rather than financial alignment. Upside drivers differ—synergy realization rather than multiple expansion. Downside differs—integration failure rather than multiple contraction. Governance provisions matter differently since the strategic buyer has full operational control regardless. Liquidity dynamics also differ, as strategic buyers may hold longer for synergy extraction or shorter if they’re consolidating for eventual sale. Apply different evaluation frameworks for strategic versus financial sponsors.

Market Cycle Timing

As of Q4 2025, credit conditions have stabilized from the tightening experienced in 2023-2024, though amounts remain below 2021 peaks. Sponsor return expectations remain robust, but holding periods have extended as exit markets normalize. Rollover terms and opportunities are cyclical. In looser credit environments, PE sponsors can afford less aggressive rollover demands; in tighter markets, they prioritize seller alignment through rollover. Monitor broader credit market trends when evaluating rollover timing.

The Rollover Equity Evaluation Framework

Evaluating rollover equity opportunities requires systematic analysis across multiple dimensions. We recommend sellers work through the following framework before accepting or negotiating rollover terms. Note that rollover evaluation typically requires $75,000-$150,000 in professional advisor fees (financial advisor for return modeling, tax advisor for structure optimization, legal counsel for governance review, and potentially independent valuation) plus significant executive time commitment of 40-60 hours.

Step One: Assess the Buyer’s Track Record

Request information on the sponsor’s previous investments, including entry multiples, exit multiples, holding periods, and returns to rollover participants. But recognize practical limitations: sponsors typically provide only aggregated performance data because of limited partner confidentiality requirements. Expect summary statistics rather than deal-by-deal analysis, and recognize that disclosed data may present performance in the most favorable light.

This process typically takes 6-10 weeks assuming sponsor cooperation; reluctant sponsors may require 12+ weeks for adequate analysis. In competitive deal processes, this timeline creates real tension—extended analysis may signal lack of commitment or create deal friction. Balance thoroughness with deal execution risk, particularly in bilateral negotiations.

Pay particular attention to deals that didn’t perform well. Every sponsor has investments that underperformed. How they handled those situations—whether they protected minority interests or prioritized their own recovery—tells you more about how they’ll treat your rollover than their success stories.

Critically, even sponsors with strong historical track records face significant performance variance. Top-quartile funds consistently achieve 2-3x return targets, while bottom-quartile sponsors generate modest returns or losses for rollover participants. Past performance provides helpful signal but imperfect prediction, especially across different market cycles.

Step Two: Stress-Test the Capital Structure

Request the projected capitalization table and model scenarios where the investment underperforms. At what EBITDA level does your rollover equity get wiped out by debt above it? How much cushion exists between projected performance and that break-even point?

To illustrate downside risk, assume you roll $2 million for 10% equity in a business entered at 6x EBITDA ($100M enterprise value, implying $16.7M EBITDA). If the business underperforms and the sponsor issues preferred equity to inject capital or manage obligations, your 10% stake could be diluted to 6-8%, reducing your equity value accordingly. If the business is ultimately sold at 5x EBITDA instead of the projected 7x (a $15M EBITDA × 5x = $75M exit versus $15M × 7x = $105M), your rollover stake (assuming no dilution and typical 4x debt with debt paydown) could be worth significantly less than projected—potentially generating losses rather than gains.

Conservative capital structures with 3x debt and significant equity cushion provide very different risk profiles than aggressive structures with 5x debt and thin margins for error. Your rollover sits below all that debt in the capital stack.

Step Three: Evaluate Governance Protections

Work with M&A counsel experienced in private equity transactions to evaluate the governance provisions protecting minority holders. Key protections include:

Step Four: Negotiate the Terms

Rollover percentages are negotiable, but your power depends on competitive tension. If you have multiple offers, you have genuine negotiating power. If this is a bilateral negotiation, the sponsor’s equity check flexibility may be constrained by their fund structure and investor commitments.

Before negotiating aggressively on percentage, think about whether enhanced governance provisions or accelerated liquidity rights might achieve similar protection with less impact on the deal economics the sponsor needs to hit. Consider negotiating for reduced rollover percentages if your evaluation suggests the opportunity doesn’t justify the proposed amount. Alternatively, negotiate for enhanced governance protections, accelerated liquidity provisions, or minimum return guarantees that reduce your downside exposure.

Step Five: Model the Opportunity Cost

Compare rollover returns to alternative investments using realistic assumptions and probability-weighted scenarios. Model three scenarios:

Base Case (40% probability): Sponsor achieves target returns, rollover generates 2.0x over five years Upside Case (25% probability): Sponsor exceeds targets, rollover generates 3.0x over five years
Downside Case (35% probability): Sponsor underperforms, rollover generates 0.5-1.0x over five years

Using these illustrative probabilities: Expected value = (0.40 × 2.0) + (0.25 × 3.0) + (0.35 × 0.75) = 0.80 + 0.75 + 0.26 = 1.81x

Compare to diversified portfolio expected value of roughly 1.4-1.5x over five years at 7-8% returns. The rollover shows higher expected value but with much greater variance and zero liquidity.

Adjust these probabilities based on sponsor track record, capital structure cushion, and your assessment of thesis execution probability. Only accept rollover when expected risk-adjusted returns genuinely exceed alternatives given your specific circumstances.

Alternative Structures to Consider

Rollover is not the only mechanism for continued post-sale participation. Before optimizing rollover terms, step back and evaluate alternatives:

Earnouts

Deferred cash payments tied to EBITDA targets, revenue milestones, or operational metrics. Earnouts provide participation in upside while preserving immediate liquidity.

When earnouts are superior to rollover: When you want upside participation but need more immediate liquidity; when milestone metrics are objective and verifiable; when your involvement directly drives achievement.

When earnouts are inferior: When metrics are subjective or easily manipulated by buyer; when buyer controls accounting decisions affecting earnout calculations; when you have limited influence over milestone achievement post-close.

A seller offered 25% rollover for $4.5M might alternatively negotiate for $3M cash at close plus $1.5M earnout tied to specific, verifiable milestones—providing meaningful liquidity while retaining upside participation with less concentration risk.

Seller Notes

Debt instruments with coupon rates and repayment schedules, providing fixed returns and priority over equity in the capital structure.

When seller notes are superior: When you prefer predictable returns over equity upside; when capital structure is aggressive and equity risk is elevated; when you need periodic cash flow during holding period.

When seller notes are inferior: When you genuinely believe in significant equity upside; when seller note terms (rate, term, subordination) are unfavorable; when you want governance participation that debt doesn’t provide.

Hybrid Structures

Reduced cash at close plus lower rollover plus earnout, balancing liquidity, participation, and control across multiple mechanisms.

Alternative Transaction Structures

Would selling to this buyer with these terms create more wealth than continuing to operate the business independently, selling to an alternative buyer type (strategic versus financial), or waiting for future market conditions? Sometimes the better decision is accepting a lower sale price with zero rollover rather than maximizing sale price with forced rollover participation.

Taking All Cash

Taking all cash provides immediate diversification and liquidity but forgoes potential upside. This approach is superior when your risk tolerance, liquidity needs, or skepticism about the sponsor’s capabilities outweigh the potential for higher returns through continued participation. For many sellers, the peace of mind from complete diversification exceeds the expected value of rollover participation, especially given the illiquidity and concentration risk involved.

Tax Implications and Planning Strategies

The tax treatment of rollover equity creates planning opportunities that sophisticated sellers use to boost after-tax returns.

Section 351 Treatment

When rollover is structured as a contribution of existing shares for shares in the new holding company, Section 351 typically applies. Your rollover shares take a carryover basis equal to your basis in the original shares, and no gain is recognized until you ultimately sell the rollover stake.

This treatment effectively converts current capital gains into deferred gains, providing present value benefits from the time value of money. It also provides optionality—if tax rates increase before your exit, you’ve benefited from today’s rates; if they decrease, you benefit from the lower rates at exit.

Estate Planning Integration

For sellers with estate planning objectives, rollover equity can be strategically transferred to trusts or family members at current valuations. If the rollover stake appreciates significantly, this appreciation occurs outside your taxable estate, transferring wealth to future generations with minimized transfer tax consequences.

Understanding Rollover Failure Modes

Rollover equity carries significant failure risks that deserve explicit quantification:

Sponsor Underperformance (30-40% probability based on PE performance dispersion): Even well-regarded sponsors fail to achieve target returns in a meaningful percentage of investments. Market conditions, execution challenges, or thesis failures can result in partial or total loss of rollover capital. Mitigation includes conservative capital structure requirements and strong governance rights, but neither eliminates this risk.

Unexpected Liquidity Needs (15-25% probability over five-year holding period): Medical emergencies, divorce, family changes, or compelling investment opportunities can create liquidity needs during the holding period. Your rollover stake provides zero liquidity regardless of your circumstances. Mitigation requires maintaining adequate liquid reserves outside your rollover allocation.

Governance Protection Failures (10-20% probability in distressed scenarios): When sponsors face fund pressure or portfolio company distress, governance protections may prove inadequate. Enforcement requires expensive litigation with uncertain outcomes. Dilution, forced sales, or unfavorable restructuring can occur despite paper protections. Mitigation includes strong legal counsel and well-drafted agreements, but ultimate protection is imperfect.

Sellers should model these scenarios and ensure they can withstand total loss of rollover capital without materially impacting retirement security or lifestyle.

Actionable Takeaways

Before You Negotiate:

• Calculate your post-transaction net worth assuming rollover value goes to zero. If that outcome creates genuine financial hardship, reduce the rollover percentage or boost protections significantly.
• Request and analyze the sponsor’s track record, understanding you’ll likely receive only summary data because of LP confidentiality requirements. Allow 6-10 weeks for this process.
• Model the capital structure under stress scenarios to understand how much performance cushion protects your equity position.
• Consider alternative structures (earnouts, seller notes, hybrid approaches) that might achieve your participation goals with better risk management.
• Budget $75,000-$150,000 for thorough professional evaluation including financial, tax, and legal advisors.

During Negotiation:

• Treat rollover percentage as negotiable, but recognize your power depends on competitive tension and sponsor constraints.
• Prioritize governance protections that provide practical value, particularly tag-along rights, anti-dilution provisions, and distribution waterfall provisions—while recognizing these require expensive litigation to enforce.
• Consider ratchet provisions that adjust your ownership percentage if the investment underperforms specified thresholds.
• Think about whether enhanced governance provisions might substitute for reduced rollover if the sponsor resists percentage reduction.

Before You Sign:

• Have M&A counsel review all governance provisions and explain realistic scenarios where protections might fail, including the cost and timeline for enforcement.
• Confirm tax treatment with qualified advisors and structure the transaction to maximize deferral and potential QSBS benefits. Verify current law, as these provisions are subject to legislative change.
• Discuss the rollover with your financial advisor in the context of your overall wealth plan and liquidity needs.
• Model probability-weighted returns across base, upside, and downside scenarios before accepting rollover terms.

After Closing:

• Exercise your information rights actively, reviewing financial statements quarterly and asking questions when performance diverges from projections.
• Maintain relationships with sponsor personnel to stay informed about strategic developments and exit timing.
• Document all communications regarding governance matters in case disputes arise later.

Conclusion

The rollover equity decision represents one of the most consequential choices you’ll make in your business exit. Done right—with a sponsor whose thesis is sound, whose track record is proven, and whose alignment incentives match your ongoing involvement—rollover may generate returns that multiply your transaction proceeds and create genuine partnership under favorable conditions. Done poorly, it ties up capital you can’t afford to risk in situations you can’t control.

The difference lies in rigorous evaluation, realistic assessment of your own circumstances, and willingness to negotiate terms that serve your interests rather than accepting standard structures that primarily benefit buyers. Even strong sponsors face significant performance variance, and governance protections require expensive litigation for enforcement—meaning your primary protection is careful sponsor selection and conservative rollover sizing rather than contractual provisions alone.

We encourage every client facing rollover decisions to approach them with the same analytical rigor they’d apply to any major investment—because that’s exactly what rollover equity is. The fact that it’s embedded in your business sale doesn’t change the basic question: Is this a good option for these dollars given your circumstances, alternatives, and objectives?

When the answer is genuinely yes—backed by analysis of sponsor track record, stress-tested capital structure analysis, and realistic probability-weighted return modeling—embrace the opportunity while sizing it appropriately. When analysis reveals otherwise, negotiate for terms that work, think about alternative structures, or structure your exit differently. Your post-transaction financial security depends on getting this decision right.