What is an insider rollover?

In a rollover, a holder swaps shares in the target for shares in the buyer, instead of taking cash.

Say a fund forms Woodgrove to buy Litware at $50.00 a share. Litware's founder owns 20% of the shares and rolls them into Woodgrove.

Other holders get $50.00 a share in cash. The founder gets no cash for the rolled shares, and owns part of the buyer instead.

The stake taken in the buyer is often called rollover equity. Those who roll over are usually managers, directors or large holders.

A buyer may want managers or large holders to stay invested, so they share in what happens next.

A rollover also cuts the cash the buyer needs, since it doesn't pay cash for the rolled shares. For the insider, it keeps a stake after the shares leave the market.

One count took 36 deals announced in 2024 in which private equity or similar buyers agreed to buy public companies based in the US. In 29 of them, the target had a holder of more than 10%.

In 9 of those 29, such a holder rolled over shares. That's 31%, against 14% in 2023.

In a merger with a rollover, the steps usually run in this order:

1. 1

   At signing

   The insiders sign a rollover agreement with the buyer, sometimes along with a promise to vote for the deal.

2. 2

   Before closing

   They hand their shares to the buyer, or its parent company, in exchange for new shares in it.

3. 3

   At closing

   The rolled shares get no cash. Depending on the deal, they're cancelled or stay outstanding, held by the buyer. The other shares convert into the cash price, apart from the agreement's exceptions.

An insider who rolls over sits on both sides: a holder of the target, and an owner of the buyer.

If that insider is an affiliate of the target, such as a controlling holder, the deal can be a going-private transaction. It then needs extra SEC disclosure, including each filer's view on fairness.

The board may hand the talks to a special committee of independent directors. Some deals also need approval from a majority of the shares held by others. That vote threshold is called a majority of the minority.

In December 2024, Nordstrom agreed to be bought for $24.25 a share in cash.

Before the vote, members of the Nordstrom family owned about 32.9% of the shares. Liverpool, a Mexican listed company, owned about 9.4%.

Both rolled their shares into the buyer for its stock: the family nearly all of theirs, Liverpool all of its. Other holders received $24.25 a share in cash.

Both agreed to vote for the deal. But their votes didn't count toward a second test. That test needed a majority of the outstanding shares not held by the buying group, its affiliates, or Nordstrom's directors or officers.

The deal closed on May 20, 2025.

If the deal closes, holders who don't roll over usually get the cash price, apart from the deal's exceptions.

The rolling insiders' position differs from theirs. As future owners, they can gain from a lower price paid to others. That can conflict with other holders' interests.

Some deals add safeguards for other holders, such as a special committee or a majority-of-the-minority vote.

The checklist line reads Yes when the filings say a holder, director or officer will roll over shares or invest in the buyer. The list then shows the tag Insider rollover.