M&A Talk (Mergers & Acquisitions), by Morgan & Westfield

What Exactly is a Rollover and Why Should a Seller Care?

Aug 16, 2023

Attorney Trevor Crow explains how a rollover works in M&A transactions, discussing major terms and documents involved, negotiating strategies employed by PE firms, benefits of contributing assets for equity, and the importance of a well-defined letter of intent in rollover transactions.

01:00:33

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Quick takeaways

M&A rollovers allow business owners to retain equity and become partners with the buyer, reducing risk and aligning interests.

Private equity firms propose rollovers to benefit from the seller's ongoing involvement, mitigate risk, and maximize returns for their investors.

Understanding the legal aspects of rollovers, including economic provisions and distribution waterfalls, is crucial for sellers to participate in profit-sharing.

Deep dives

Understanding M&A Rollovers

M&A rollovers are a common structure in mergers and acquisitions, particularly when selling to private equity firms. In a rollover, the business owners retain a percentage of their equity and become partners with the buyer. This allows the buyer to share the risk, benefit from the seller's expertise, and align their interests. Rollovers can be structured in various ways, but they often involve the seller's continued involvement in the business post-sale to drive future growth and combine with other companies.

Introduction

2min

The Concept of a Rollover in M&A Transactions

16min

Choice of Entity for Private Equity and Venture Capital Firms

3min

Understanding the Entity Structure and Negotiating Management Rights at the PE Firm Level

3min

The Importance of Rollovers for Private Equity Firms

16min

Contributing Assets for Equity

8min

Negotiating Terms and Structure in the Rollover

11min

The Importance of a Well-Defined Letter of Intent in Rollover Transactions

3min

Selling your business through a rollover is complicated. Attorney Trevor Crow breaks this technical topic down into clear language as he explains how a rollover works, discusses major terms and documents involved, offers insights into the tactics and negotiating strategies employed by PE firms, explains what to expect, and highlights the critical element of understanding the economic provisions involved in a rollover. Listen to this discussion and maintain your negotiating leverage by knowing what to expect.

View the complete show notes for this episode.

Learn More:

Additional Resources:

Download a free pdf copy of The Art of The Exit: The Complete Guide to Selling Your Business.
Purchase your copy now of A Beginner’s Guide to Business Valuation | The Exit Strategy Handbook | Closing the Deal | Acquired
Planning to sell your business? Schedule a free consultation today.
To suggest guests, topics, or questions for future podcast episodes, contact Morgan & Westfield.
Contact Morgan & Westfield to request a free copy of Jacob Orosz's latest book, Food and Beverage M&A: An Insider's Guide to Selling a Food or Beverage Business.

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M&A Talk (Mergers & Acquisitions), by Morgan & Westfield

What Exactly is a Rollover and Why Should a Seller Care?