The seller sells the majority but reinvests part of the proceeds, typically in the buyer's holding company. This is common with financial investors because it keeps the seller invested in the company's success. On the later onward sale, the seller achieves a second payout, the so-called second bite.
For sellers of mid-sized companies, this can increase total proceeds significantly. At the same time, you remain exposed to entrepreneurial risk and give up control. What matters are the shareholders' agreement, tag-along rights, drag-along obligations and rules for your exit, such as leaver clauses.
For German tax purposes, contributing shares to the acquisition vehicle can be done at book value if the conditions of § 21 UmwStG are met, i.e. without immediate tax on the reinvested portion. If a shareholder loan is also granted, it risks subordination in insolvency under § 39 InsO.
Example
Hypothetical example: A financial investor buys 100% for €20 million, simplified without bank debt. The seller reinvests €4 million and then holds 20% of the holding company. Five years later, the group is sold at twice the equity value, and the seller's stake then brings in €8 million.
Rollover equity vs. vendor loan
| Feature | Rollover equity | Vendor loan |
|---|---|---|
| Return | Increase in value | Fixed interest |
| Risk | Equity risk | Subordinated loan |
| Say in decisions | Shareholder rights | Contractual rights only |
| Payback | At exit | According to repayment schedule |
Sources
- Unternehmenskaufpreis mal anders finanziert: Die Rückbeteiligung, IWW Institut, PU Praxis Unternehmensnachfolge
- § 21 UmwStG Bewertung der Anteile beim Anteilstausch, Bundesministerium der Justiz
- § 39 InsO Nachrangige Insolvenzgläubiger, Bundesministerium der Justiz