Equity rollover

Definition

A seller reinvesting part of the proceeds as minority ownership.

Why It Matters

Rollover keeps the seller economically invested through the transition and reduces the cash a buyer has to raise, at the price of sharing future upside and some governance with the person you just bought from. Settle the minority rights before closing rather than after, because a seller with a blocking vote on decisions you were hired by your lender to make is a slow problem. On an SBA purchase the rulebook decides it: a seller who sells outright may not stay a stockholder, so a rollover makes the deal a partial change of ownership, in which an owner who stays personally guarantees the loan. The seller's stake has to stay in the operating company itself, since SBA will not lend where seller and buyer together own a new holding company above it.

In numbers: A seller rolling 20% of a $4M deal keeps $800k invested alongside you; that is $800k less to raise, and a seller with a reason to want year two to go well.