PE Rollover / Second Bite Simulator
Model a PE-backed rollover scenario with a second exit 3-5 years later.
In a PE-backed recapitalization, you keep equity in the company alongside the private equity buyer. You get significant cash at close but also keep 'a second bite of the apple' when the company exits in five to seven years. This structure is common with add-on acquisitions and situations where founders want to retain upside while monetizing some value.
The value of rollover equity depends on how much you keep, what percentage of the company it represents, and what multiple the company trades at on exit. A 20% rollover stake in a company that grows from 5x to 8x EBITDA could be worth significantly more than your initial exit proceeds. But modeling this correctly requires understanding dilution, the growth path, and realistic exit scenarios.
First Sale Parameters
Second Sale Parameters
Three Scenarios
Bull Case (1.5x growth)
Base Case (1.0x)
Bear Case (0.5x shrink)
How PE Rollovers Work
The deal structure: buyer pays you X in cash for partial company stake and commits to a growth plan. You keep Y% equity. In five years, the company exits at a higher multiple. Your Y% stake is worth more. You receive additional proceeds. This gives you leverage to a growth scenario without bearing all the risk of private ownership.
Calculating Rollover Equity Value
Start with your expected stake percentage post-close. Model the company EBITDA growth over five years based on buyer's growth plan. Apply a reasonable exit multiple. Calculate your stake value at exit. Discount back to today using a risk-adjusted rate (20-30% for growth equity risk). The present value of your rollover is what that equity is worth today.
Managing Rollover Risk
Rollover equity is illiquid and depends on future performance. Negotiate tag-along rights so you can sell your stake at the same time other shareholders do. Get clear documentation of your ownership percentage to prevent dilution. Understand any clawback provisions if the company underperforms. Structure your stake for tax efficiency.
Common Mistakes
Overestimating future growth
PE buyers are ambitious about growth targets. Reality is harder. Use conservative growth projections, not the buyer's aggressive deck. A 5x to 8x exit is optimistic. Plan for 5x to 6x unless the buyer has a clear track record.
Underestimating dilution
Your rollover percentage can be diluted by future financing rounds or add-on acquisitions. Negotiate anti-dilution language and tag-along rights to protect your stake.
Ignoring liquidity constraints
Rollover equity is illiquid for 5-7 years. Make sure you can afford to keep this money in the deal without needing access. Don't roll more than you can afford to lose.