Guide
Rollover Equity: You Are Financing Your Own Buyout
A rollover position is not cash. It is a minority stake in a sponsor-controlled holding company with no market, no put right, and no timeline you control.
What rollover equity actually is
When a DSO offers you $4.2 million and tells you 25 percent is rollover, they are telling you that roughly $1.05 million of the headline is not money. It is a minority, non-controlling, illiquid equity position in the acquirer's holding company.
You cannot sell it. There is no market for it. There is generally no put right that lets you force the company to buy it back. It converts to cash when the sponsor sells the platform, and only then.
Why the number on the page is not the number
Rollover is presented at the same per-dollar value as cash. It is not worth the same. Two adjustments matter.
The first is time. A sponsor typically holds a platform four to seven years. A dollar received in year five, discounted at 10 percent, is worth about 62 cents today.
The second is outcome risk. Sponsor exits are distributed, not guaranteed. A 1.0x multiple on invested capital means you get your rollover back in nominal dollars after five years, which is a real loss after discounting. A 0.5x outcome is not rare in a sector that has consolidated as fast as this one.
Price your own structure instead of reading about someone else's.
Run the Offer DecoderThe question to ask
Ask the buyer what the platform's current enterprise value is, what leverage sits above your equity, and what the sponsor's entry basis was. If your rollover sits behind a large preferred stack, the common equity you are receiving can be worth close to nothing in a mediocre exit.
What to do
Price rollover separately from cash. Run it at 0.5x, 1.0x, and 2.5x. If the deal only works at 2.5x, you are not selling a practice. You are making a venture investment with the proceeds.