Equity Rollover Commitments

Summary

This practice note discusses key considerations that arise in an acquisition transaction with an equity rollover. An equity rollover consists of a stockholder (rollover stockholder) in a target company exchanging some or all of its stock in the target for securities of an equivalent value in the purchaser. Equity rollovers are frequently used in mergers and acquisitions transactions in which financial buyers (typically private equity investors) purchase an operating company. Management equity rollovers are particularly important in connection with private equity buyouts where the private equity sponsors are motivated to retain current management. They are also common in "going private" transactions in which management or significant stockholders, often with the backing of private equity, purchase the company's outstanding public capital.