We are considering an early exit off-ramp to secure our personal wealth but the private equity firm is insisting that we rollover twenty-five percent of our equity into their new platform. How do we evaluate whether this rollover represents a genuine second bite of the apple or if we should push for a secondary transaction that provides immediate liquidity?

Question

Tyler Smith · Accepted Answer

When preparing for an early exit off-ramp, private equity buyers will often push you to roll over a significant portion of your equity into their new platform. While they pitch this as a second bite of the apple, rollover equity is highly illiquid and subject to subordination by the buyer's senior debt and preferred equity structures.

To evaluate this proposal, you must determine whether the rollover represents a genuine growth opportunity or a way for the buyer to reduce their cash investment at close.

Use a structured Thinking Time process to analyze the offer. Ask yourself: how might I structure this transaction to maximize immediate liquidity so that I can de-risk my personal financial position while maintaining a meaningful but protected upside?

If you want to maintain upside, push for a secondary transaction instead of a traditional rollover. A secondary transaction allows you to sell a portion of your shares directly for cash while retaining a smaller, clean class of common equity that does not carry the burden of the buyer's complex capital structure.

If you must accept a rollover, negotiate strict minority protections. These must include drag-along and tag-along rights, information rights, and a requirement that your rollover equity is treated on a pari passu basis with the buyer's new equity.