Rolling Over Without Getting "Rolled" – Points To Consider In Connection With Rollover Equity

The decision to sell your business comes with many matters to consider, such as the purchase price that will be paid by the buyer, the impact of the transaction on your business relationships (including those with customers, suppliers, and your own employees), and your post-closing involvement (if any) in the business. While there are a variety of decision points, one of the most important to carefully think through is the implication of accepting "rollover equity" from the buyer in lieu of cash for a portion of the purchase price. This consideration has become all the more relevant given that much of current M&A activity is being driven by private equity firms that long ago embraced the use of rollover equity. Sellers who are offered the opportunity to receive rollover equity in an M&A transaction should not necessarily shy away from this option; however, in order to avoid getting "rolled" in connection with a rollover investment, sellers should keep a few principles and concepts