“I think the seller’s expectation during rollovers should be that you’re going to lose control of the company, but there are things you can do to help alleviate the pressure of that.” –Trevor Crow
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Topics Covered:
- What is a rollover? [1:41]
- What’s the objective of a rollover? [3:48]
- How does a rollover fit into the overall M&A transaction structure? [6:40]
- Do family offices and search funds use rollovers? [9:49]
- What are the alternatives to rollovers? [11:37]
- How can a rollover provide a “second bite at the apple” in terms of a business owner cashing out when they sell? [14:55]
- Are private equity firms primarily LLCs? How are venture capital firms typically set up? Do different entity structures impact a rollover? [17:53]
- What expectations should a seller have during a rollover? [25:41]
- Early in the negotiating process, how much communication is there to make sure that visions and expectations are aligned between the seller and the buyer? [29:13]
- How important is the seller’s leverage before signing the letter of intent (LOI)? [30:15]
- What documents are needed to record a rollover transaction? [33:02]
- How does the contribution agreement work, and how much complexity does it add to the purchase agreement? [39:08]
- What are the major terms to consider in an LLC operating agreement? [41:25]
- What are the objectives of the mechanisms a PE firm will put into a rollover agreement? [43:25]
- How important is it to negotiate and sign a well-defined LOI early in the sales process? [47:00]
- What is the proper length for an LOI? What problems does a one-page LOI present? [52:42]
- What are the benefits of a seller hiring an attorney to assist in negotiating the LOI? [56:16]
- What is the most important benefit or piece of advice to sellers when it comes to rollovers? [57:44]