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The other rollover equity option

Nov 16, 2022 3:02:35 PM / by Everything DSO

Hopefully you read my last email where I briefly went over the opportunity for keeping “skin in the game” and what that means for your long term financial benefit.

There’s another type of Rollover Equity …

Where you don’t receive a percentage of your practices value, but rather the DSO offers you a percentage of the overall DSO enterprise.

The nice thing about this kind of equity is that it puts you in complete alignment with the DSO and their financial sponsor, and your financial benefit is not solely dependent upon how well your practice grows.

As far as your financial benefit goes, the main difference is that you don’t get profit distribution or return on your equity until a sale or recapitalization takes place …

BUT you do benefit from the sale or recapitalization of other entities which are a part of the DSO.

The potential return here can be quite significant, depending on the DSO.

But you do need to understand aspects of your equity position.

This can be complex to understand, so I can go over the details with you on a phone call, but to breifly explain…

There are two key things to understand:

How the dollar value of your rollover investment is converted to equity, and where the DSO is on the sale/recapitalization timeline.

These two details will determine how much you actually receive and when you are likely to receive it.

Not all equity is equal, so it’s important to have a good estimate on the investment return of your equity in these deals.

Everything DSO

Written by Everything DSO

 Stan Kinder

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