What is rollover equity in a practice sale?
Rollover equity is the portion of sale proceeds that the selling owner retains as equity in the buyer's platform, generally 10 to 40 percent of the practice's total enterprise value in physician deals according to Foley & Lardner, creating a second liquidity event when the platform is later sold.
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Definition
Rollover equity is a structural element of a private equity acquisition where the seller takes a portion of the purchase price in the form of equity in the buyer's entity instead of cash at close.
The detail
Rollover equity is how PE buyers align incentives and conserve cash. In physician practice deals, Foley & Lardner says the purchase price is usually split between cash and rollover equity in the recapitalized practice, with rollover generally 10 to 40 percent of the practice's total enterprise value and up to 40 percent in larger deals. Deals are almost always structured so the rollover is received tax-deferred, and it keeps the selling physicians invested in growing the larger organization. The seller holds that stake through the PE firm's hold period (the median for PE-backed companies has reached 6.0 years, according to Private Equity Info) and participates in the gain when the platform is sold or recapitalized. Worked example: if the platform is bought at 8x EBITDA and sold at 12x with EBITDA unchanged and no debt, each rolled dollar becomes $1.50. EBITDA growth pushes that higher, debt amplifies the result in both directions, and a lower exit multiple can push it below $1. The main risks: the seller does not control the platform's strategy, the next exit may not happen on the expected timeline, and rollover equity is typically illiquid until the next transaction. Foley adds two more. Rollover equity is often subject to transfer restrictions and possible forfeiture if the physician leaves the practice, and some buyers now require physicians to "re-roll" part of their equity into the next platform sale, in some cases up to 100 percent. Structural questions matter: common versus preferred units, drag-along and tag-along rights, any minimum return, and a cap on how much you can be required to re-roll.
Rollover equity in the MSO "can, generally, range from 10-40% of the total enterprise value of the acquired practice," and it is a tax-deferred way for physician owners to reinvest.
In larger physician practice deals, rollover equity can be up to 40% of the value of the recapitalized practice.
Source: Foley & Lardner, Physician Practice Private Equity Transactions: A Refresher (Jan 2025)
The median holding period for private-equity-backed portfolio companies has reached 6.0 years, the longest since Private Equity Info began tracking it.
What this means for clinic owners
From Sorso
Rollover is a bet on the PE firm's platform thesis and the broader sector multiple. If you believe in the platform and the sector, the second bite of the apple can outweigh the cash at close. If you are selling because you want out, take more cash and less rollover — whatever the spreadsheet says.
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What is a med spa worth?
A med spa (medspa) typically sells for 3x to 6x EBITDA when it is small (typically under $5M of revenue) and 5x to 8x at $5M to $20M of revenue, according to Scope Research's 2026 med spa update. Regional chains above $20M of revenue reach 7x to 12x, and high-growth national platforms 10x to 20x. Buyers pay more for repeat-client revenue, a recognized brand and scale, and less for a spa that depends on its owner.
How do PE firms value medical practices?
Private equity firms value a medical practice as a multiple of its trailing-twelve-month adjusted EBITDA, and the multiple rises with scale. Published ladders run from 2.5–4x for a single owner-operated physical therapy clinic (Breakwater M&A) to 10x–20x for large primary care platforms (Scope Research), and payer mix, growth and owner dependence move a practice within its band.
What is the difference between platform and add-on multiples?
Platform acquisitions trade at higher EBITDA multiples than add-ons because the buyer is paying for scale, management and a base to acquire from, while an add-on brings its earnings into a platform that already has those things. In dental, FOCUS Investment Banking puts platform investments at 9–11× EBITDA and add-on acquisitions at 5–8×.
What is an LOI in healthcare M&A?
A letter of intent (LOI) in healthcare M&A is a mostly non-binding agreement that sets the proposed purchase price, structure, exclusivity period, and diligence timeline before a buyer commits the resources to close a deal. The exclusivity and confidentiality clauses are the parts that usually bind.
What is a working capital peg in an M&A deal?
A working capital peg is the target level of net working capital the buyer expects at close; delivery above or below the peg results in a dollar-for-dollar purchase price adjustment, which can move the headline price at close in either direction.
What is an earnout in a healthcare M&A deal?
An earnout is a portion of the purchase price paid only if the practice hits financial targets after closing, usually revenue, collections or EBITDA measured over one to three years. In dental DSO deals, Jaffe Law puts earnouts at 10% to 30% of deal value, and SRS Acquiom's deal data put the achievement rate for earnouts outside life sciences at 21 cents on the dollar.
What is a platform investment thesis in healthcare PE?
A platform investment thesis is the PE firm's plan for how a first acquired practice will grow into a multi-location roll-up through add-on acquisitions, built around growing EBITDA substantially over a hold period that now runs to a 6.0-year median. We have not found a published figure for how much EBITDA growth platforms target, so treat any specific multiple of growth as a negotiating claim rather than a benchmark.
What is a MEIP in a healthcare PE deal?
A management equity incentive plan (MEIP) is a pool of equity reserved for executives and providers who stay with the platform after a PE deal, paying out at the next liquidity event. In WTW's 2026 survey of 47 PE-backed companies, the median pool was 10% of undiluted shares, and 75% of it was granted up front.
What is an MSO in healthcare, and does my practice need one?
An MSO (management services organization) is a separate company that runs a practice's non-clinical side, such as staff, billing, space, equipment and IT, for a management fee, while a practice entity owned by licensed clinicians keeps control of patient care. A practice owned entirely by its own clinicians usually does not need one; it earns its cost when non-licensed investors or partners need a share of the economics in a state that restricts who may own a medical practice, or when several sites share one back office.
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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