Example: $10M price, 20% rolled (fictional)
| Scenario at platform exit (5 years) | Value of your $2M rollover | Total received |
|---|---|---|
| Platform value doubles | $4,000,000 | $12,000,000 |
| Platform value flat | $2,000,000 | $10,000,000 |
| Platform value falls 50% | $1,000,000 | $9,000,000 |
| Platform over-levered, equity wiped out | $0 | $8,000,000 |
Terms to negotiate
- Same security as the sponsor (not a junior class), bought at the same price per unit.
- Tag-along rights so you sell when the sponsor sells.
- No forfeiture on leaving unless for cause; clear repurchase terms at fair value.
- Information rights: annual financials and valuation marks.
- Tax-deferred structure: rollovers are often structured to defer tax on the rolled portion (for example under Sections 351 or 721); a poorly structured rollover can be taxed at closing on value you did not receive in cash. Ask your CPA to review the structure.
Check where the sponsor is in its hold
A platform whose sponsor invested recently may be held for years; one that is several years in may be sold soon, which can crystallize your second bite faster. Our acquirer profiles list sponsor investment dates from primary sources.
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Frequently asked questions
What is rollover equity?
The portion of your sale proceeds reinvested into the buyer’s equity, usually 10-30% in PE-backed deals, paid out when the platform is sold.
Is rollover equity taxed at closing?
It can be structured to defer tax on the rolled portion, but structure matters. Have a CPA review before signing.
Can SBA buyers offer rollover?
Partial changes of ownership are possible under SBA rules only as stock deals, and a seller who keeps equity must guarantee the loan for two years.