Private equity (PE) investors often require certain founders or sellers to exchange or “rollover” in Transactions a percentage of their equity into the buyer of the business (or into a fund or holding company controlled by the PE investor). A similar rollover structure might involve the sellers being required to “co-invest” with the buyer by directly reinvesting (or rolling) a portion of the cash received by the sellers into a minority percentage of the equity of the target company. The value of the buyer equity is then driven by the target company’s post-closing performance.

In addition to other equity-based management incentives (such as participation in an employee equity incentive plan), rollover transaction structures are used to better align the post-transaction interests of the PE investor and the sellers (such as where founders or key executives are expected to remain with the target company in some capacity after the transaction closes).

The Buyer also perks from a rollover structure as it results in a reduction in the required cash outlay to pay the purchase price.



A rollover structure can also be favorable to selling parties by providing them with an opportunity to participate in potentially high upside upon an exit of the post-closing company (think “second bite at the apple”), particularly in instances where PE partners have a track record of creating significant post-closing benefits through their capital, contacts, or operational expertise.

Rollover structures can also bridge potential valuation gaps that may exist between sellers and buyers over the target company.

Rollover Structures in M&A; Transactions

A rollover structure is different than (but is sometimes combined with) the grant of post-closing stock options, LLC “profits interests” or other traditional employment-based equity in the target. Stock options and profits interests are usually subject to vesting and other company favorable terms (such as being junior in right and payment) th

📌 Rollover Structures in M&A Transactions (India)
🏢 Linden Law Partners
📍 India