In many transactions the seller retains or receives equity in the buyer’s structure rather than taking all cash. The terms of that retained interest deserve as much attention as the cash price.
Where it sits. In the acquisition vehicle, a parent holding company, or an operating subsidiary. Position in the structure determines what the rollover participates in, including future acquisitions.
Class and waterfall. Rollover holders frequently receive common while the sponsor holds preferred with a liquidation preference and accruing return. The headline percentage is not what the interest is worth; the waterfall is.
Governance. Board representation or observation, protective provisions, and information rights. Minority rollover holders in a sponsor-controlled structure have whatever the documents give them and nothing else.
Transfer and exit. Tag-along rights on a sponsor sale, drag-along obligations, a put right on defined events, and treatment on termination of employment — good leaver and bad leaver definitions, and the price applicable to each.
Dilution. Anti-dilution protection, participation rights in future rounds, and the treatment of management incentive plans, which typically dilute rollover holders.
Tax. Structuring for tax deferral on the rolled portion requires care and constrains the transaction structure. It should be confirmed before terms are agreed, not after.