Guide

DSO rollover equity: how to tell real upside from paper

Rollover equity is the part of a DSO deal that is hardest to value and easiest to oversell. Here is how to read the structure before you accept units instead of cash.

By Blane Jackson, DDS/MBA · Practicing dentist and multi-practice owner/operator · Updated April 2026

In a typical DSO acquisition, 15 to 40 percent of your purchase price is not cash. It is rollover equity: units in a holding company, granted in exchange for the portion of your practice value you leave in the deal. The pitch is always the same — participate in the platform's growth, get a "second bite of the apple" at the next recapitalization.

Sometimes that pitch is real. Heartland sellers who rolled equity before the 2018 KKR recap did well. But rollover equity is also the easiest part of a deal to oversell, because it is the hardest part for a seller to independently value. Five structural questions determine whether your rollover is an investment or a discount on your own practice.

1. Which entity are you holding?

Most platforms are structured as a stack: your practice sits under a market-level sub-LLC, which sits under a regional HoldCo, which sits under the platform HoldCo that private equity actually owns and eventually recapitalizes. The liquidity event happens at the top of the stack.

If your units are in a sub-LLC or regional entity, your equity is real but it is not in the entity that gets sold. Ask for the organizational chart, in writing, and ask one direct question: "When the platform recapitalizes, do my units participate in that transaction automatically, or do they require a separate event at my entity's level?"

2. What class are your units?

Private equity sponsors typically hold preferred units with a liquidation preference: in a sale, they are paid back their invested capital — often with an accrued return — before common units receive anything. Seller rollover is almost always common.

That means your units are worth their headline value only in an upside scenario. In a flat or down exit, the preference stack absorbs the proceeds first. This is why a dollar of rollover is not worth a dollar of cash, and why deals quoting rollover at face value in the headline price deserve skepticism.

3. What is the unit price based on?

Your practice is being bought at, say, 6x EBITDA, and your rollover is being issued at the platform's current internal valuation — often 10x or more. You are selling low and buying high in the same transaction. That can still work if the platform multiple holds at exit, but the embedded math deserves to be made explicit: ask what platform EBITDA and multiple the unit price assumes, and what the same units were issued at in the last twelve months.

4. What are your rights as a holder?

Read the operating agreement, not the term sheet summary of it. The questions that matter: Can you be diluted by future issuances without consent? Is there a drag-along that forces you to sell on the sponsor's terms? Is there any put right or repurchase obligation if you retire, die, or are terminated? What happens to your units if you leave before the recap?

The last one is the quiet killer. Some agreements tie full equity value to continued employment, converting your "investment" into deferred, forfeitable compensation.

5. What is the realistic liquidity timeline?

Sponsors talk in 3-to-5-year hold periods, but platform recaps slipped industry-wide after 2022 as debt got expensive. A rollover with no put right and no secondary market is illiquid for as long as the sponsor needs it to be. If you are 60 and counting on the second bite to fund retirement, the timeline risk is yours, not theirs.

The practical test

Model your deal with the rollover valued at zero. If the cash at close still clears your number — debt payoff, taxes, and the life you are buying — the rollover is upside and you can take the bet. If the deal only works when the rollover pays out at face value, you are not selling your practice; you are investing in a private equity fund with one LP and no exit rights. Price it that way, or negotiate the rollover percentage down and the cash up.

Either way, bring the operating agreement to a transaction attorney who has read a dozen of them. The cost of that review is a rounding error against the size of this decision.