Rollover Equity
Also known as: Equity Rollover, Rolled Equity
Rollover equity is the portion of sale proceeds a seller reinvests into the acquiring entity, keeping them as a co-owner with a stake in the future upside.
Rollover equity occurs when a seller, instead of taking all cash at closing, reinvests part of their proceeds into the buyer’s new ownership structure. The seller rolls over, say, 20 to 30 percent and becomes a minority owner alongside the new investor.
Why both sides like it
For the buyer, especially a private equity firm running a leveraged buyout, rollover keeps the seller invested in the outcome and signals confidence in the business. For the seller, it offers a second bite at the apple: a chance to participate in the upside when the company is sold again later.
The trade-off
Rolled equity is illiquid and sits behind the new debt and any preferred returns, so it carries real risk. Sellers weigh the potential second payday against taking certain cash today.