Calfee Connections

The decision to sell your business comes with many matters to consider. One of the most important things to carefully consider is the implication of accepting “rollover equity” from the buyer in lieu of cash for a portion of the purchase price. This consideration has become all the more relevant given that much of current M&A activity is being driven by private equity firms that long ago embraced the use of rollover equity. Sellers who are offered the opportunity to receive rollover equity in an M&A transaction should not necessarily shy away from this option; however, to avoid being “rolled” in connection with a rollover investment, sellers should keep a few principles and concepts in mind.

In addition to identifying the impact of intercompany transactions and avoidable transfers that may arise in the FTX case, crypto-related bankruptcies typically present unique challenges to creditors and customers. 

In an M&A market that remains exceedingly frothy, many would-be buyers in the middle market are being forced to acquire the equity of a target company (rather than its assets) in order for their bids to be competitive. 

When the purchaser and the seller of a business are not able to negotiate an agreed-upon price to be paid at closing, one option is to incorporate an earnout provision into the transaction document.

Being a business owner always carries a certain level of risk. However, the rewards of ownership can be great as well. Whether you own one company or a portfolio of enterprises, you know that leveraging your assets and minimizing your liabilities is key.