A private equity sponsor wants us to roll over thirty percent of our equity into their new platform, but we are worried about being diluted or locked out of decision-making. How do we use our EOS Accountability Chart and governance terms to negotiate protection for our minority rolled-over equity?

Question

Tyler Smith · Accepted Answer

Rolling over equity can lead to a second payout that is larger than your first, but only if you protect yourself from being sidelined by the private equity sponsor. Without strong governance protections, the sponsor can dilute your shares, allocate heavy corporate overhead to the business, and shut you out of key decisions. Protect your investment by using your EOS Accountability Chart as the blueprint for governance. Ensure that the definitive agreements clearly define your operational authority. If you are staying on as the Visionary or Integrator, your role must have clear, documented decision making boundaries. This prevents the private equity sponsor from micromanaging your daily operations or changing your core team without your consent. Negotiate for specific minority investor protections in the shareholder agreement. These protections must include veto rights over major corporate actions, such as taking on excessive debt, selling key assets, or issuing new classes of shares that would dilute your equity. Demand tag along rights, which guarantee that if the sponsor sells their majority stake, you have the right to sell your shares on the exact same terms. Define how corporate overhead will be allocated to your business unit. Ensure that any management fees charged by the private equity firm are capped and do not artificially depress the value of your rolled over equity. By tying your operational freedom to the Accountability Chart and securing robust veto rights, you protect your minority equity while helping build a massive platform.