Seller guide
Rollover Equity and Earnouts: How Private Equity Pays Physicians
In a platform deal, the headline price is paid in pieces. Here is what each piece is worth, and what can go wrong.
Short answer
In most private equity practice deals, you are paid partly in cash at closing and partly in rollover equity, an ownership stake in the buyer's platform. Some deals add an earnout tied to future results. Dermatology Times reported a common split of 70% to 80% cash with the rest rolled. Rollover can multiply if the platform sells again, but it sits behind debt and investor returns, and leaving early can forfeit it.
Rollover equity: what it is
Rollover means reinvesting part of your sale proceeds in the buyer's platform. Nixon Peabody describes rollover as standard in private equity physician deals, often required, giving physicians "a minority ownership stake in the platform entity."
The idea is alignment. You keep a stake in how the group performs, and if the platform is sold again in three to seven years at a higher value, your stake can be worth more than the cash you gave up. Dermatology Times described this "second bite" in August 2026: platforms trade at much higher multiples than the individual practices they buy.
Where rollover sits when the platform sells
The second sale is when rollover pays off, or does not. Nixon Peabody lays out the usual order of payment at that exit:
- Platform debt and transaction expenses.
- The investor's preferred capital and preferred return.
- Any senior equity classes.
- Common equity, "which is where most physician rollover sits."
If the platform carries a lot of debt or underperforms, there may be little left for common equity. Ask what class your equity is, what sits ahead of it, and how much debt the platform carries.
Leaver terms: the clause to read twice
Rollover equity is often tied to you staying. Under typical "bad leaver" terms, such as resigning early, Nixon Peabody notes a physician may forfeit unvested equity and have vested equity bought back at cost, receiving only the original rollover amount with no share of the gain. Equity rolled again at a second sale may start a new vesting schedule from zero.
Earnouts: price that depends on the future
An earnout pays part of the price later if the practice hits targets, such as revenue, earnings or provider retention. Brown & Fortunato notes healthcare earnouts are often used where future performance depends on provider retention, payer mix, referral patterns or reimbursement.
Earnouts often pay less than sellers expect. SRS Acquiom's 2026 study of private-company deals across industries found earnouts paid about 21 cents on the dollar on average. Treat an earnout as possible upside, not guaranteed price.
Earnout risks specific to medicine
- Control after closing. If the buyer controls staffing, scheduling and payer contracts, it controls the things that drive your earnout.
- Offsets. Some agreements let the buyer reduce earnout payments to cover indemnity claims.
- Legal limits. ByrdAdatto notes a 2024 New York court found a revenue-based earnout violated state fee-splitting law. Where the buyer receives your referrals, such as a hospital, earnouts raise Stark and Anti-Kickback concerns.
How to compare two offers
| Question | Why it matters |
|---|---|
| How much is cash at closing? | The only part of the price that is certain. |
| What class is my rollover, and what is ahead of it? | Decides what you receive at the second sale. |
| What are the leaver and vesting terms? | Decides what you keep if you leave early. |
| Who controls the earnout drivers? | Decides whether you can actually earn it. |
| What will I be paid after the sale? | A higher price often comes with lower post-sale pay. |
We put every offer in a side-by-side table like this before you choose. See also how investors legally buy medical practices.
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Get a Free Practice ValuationCommon questions
What is rollover equity in a medical practice sale?
It is the part of your sale proceeds reinvested in the buyer's platform. One 2026 trade report described a common split of 70% to 80% cash at closing with the rest rolled into equity.
Do earnouts usually pay out?
Often not in full. A 2026 study of private-company deals across industries found earnouts paid about 21 cents on the dollar on average.
Can I lose my rollover equity if I leave?
Possibly. Under typical bad-leaver terms, unvested equity can be forfeited and vested equity bought back at cost.
Related reading
Sources
Figures are attributed to their source and date. Ranges are published estimates, not a valuation of any practice.
- Nixon Peabody, "Preparing your medical practice for a private equity transaction," March 6, 2026. Link
- Nixon Peabody, "The second exit: What happens to physician rollover equity when the platform sells," March 17, 2026. Link
- Dermatology Times, "Other People's Money and the Rise of Private Equity in Dermatology, Part 1," August 21, 2026. Link
- Brown & Fortunato, "Five Deal-Term Trends Healthcare M&A Participants Should Watch in 2026," August 21, 2026. Link
- SRS Acquiom, "2026 M&A Earnouts & Claims Study," 2026 (all private-target deals, not healthcare-specific). Link
- ByrdAdatto, "123s of Health Care Earnouts," December 30, 2024. Link