Rollover Equity
When the seller keeps a minority stake post-close to align incentives, and the governance terms that decide if it is real equity or just retained risk.
- Tag-along and drag-along rights
- Preemptive rights on new equity issuance
- Information rights
- Liquidity events and forced exit triggers
If this clause already feels aggressive in isolation, upload the full contract and see how it combines with payment terms, liabilities, and exit rights.
Analyze My ContractWhat this clause actually does
Rollover equity is when the seller takes a portion of purchase price in shares of the buyer entity instead of cash, typically 5% to 25%. It aligns seller incentives with the buyer post-close and reduces the cash funding need. Governance and tag-along rights decide whether the rollover is meaningful equity or trapped capital.
Why people get burned by this clause
On searcher acquisitions, rollover equity is often used to reduce the cash check size. If the seller has no protective rights, the buyer can dilute, freeze out, or block exit indefinitely.
What should make you slow down
- No tag-along right on subsequent buyer sale
- No drag-along participation rights or unfair drag terms
- Buyer can issue new equity at any price without preemptive rights
- No information rights on company financials
- Vesting or forfeiture on seller's continued employment
Where you usually see it
- Asset purchase agreements
- Shareholders agreements
- Operating agreements
What the platform checks in the live contract
- Tag-along and drag-along rights
- Preemptive rights on new equity issuance
- Information rights
- Liquidity events and forced exit triggers
- Vesting tied to employment (red flag for retiring sellers)
What stronger language usually looks like
- Tag-along on any sale of 25%+ of buyer equity
- Pro rata preemptive rights on new issuance
- Quarterly financial statements
- Put right after 5 years at fair market value
Definitions worth opening next
Articles that go deeper
Rollover equity without tag-along and information rights is just retained risk. Demand the same governance protections an institutional minority investor would.
See how this clause behaves in the real contract.
The clause library gives you judgment. The full review shows how this clause combines with the rest of the agreement, then quotes the exact language, scores the risk, and explains what to push on next.