Keeping a Stake: Should You Roll Part of Your Sale Into the Buyer's Business?

What You Agree To When a Buyer Asks You to Keep a Share

Introduction

Owen had spent nineteen years building a commercial cleaning and facilities business in Devon when an investor-backed group offered to buy it. The figure was better than he had hoped. Then he read the second paragraph of the letter.

The group would pay 80% of the price in cash when the sale completed. For the other 20%, Owen would receive shares in the company the group was setting up to buy his business. The letter said the group expected to be sold itself in four or five years, and that his shares could be worth two or three times as much by then.

His first reaction was relief that the headline number was right. His second, at two in the morning, was that a fifth of his life's work would now depend on people he had met twice.

What the buyer was proposing is called a rollover: part of the price is paid in shares in the buyer's business instead of cash, so you stay invested after the sale. It can work well. It can also leave you with a small stake in someone else's plan and very little say in how that plan goes.

Rollovers are becoming more common. In its review of the 2025 private equity market, the law firm Shoosmiths reported that gaps between what sellers expected and what buyers would pay led to longer sales, more earn-outs and deferred payments, and larger rollover stakes for sellers. CapEQ, an adviser that tracked 155 testing, inspection and certification deals under £100m across the UK and Europe in the twelve months to August 2026, found earn-outs and rollovers were often a condition of the deal, and that most testing-services deals included a rollover for the founder or managers.

If a buyer asks you to keep a stake, these are the questions to settle before you agree the main terms.

1) Why Does the Buyer Want You to Stay In?

Owen asked the group's deal lead directly. The answer came in two parts, and both were fair.

The first was the price. The group valued the business a little below Owen's figure. Paying part of the price in shares let them meet his number while keeping some of the risk with him: if the business did as well as he said it would, his shares would reflect it.

The second was Owen himself. He had won most of the largest contracts, and several clients still rang his mobile. A buyer in that position wants the owner to have a reason to stay and help, and a stake in the outcome gives him one.

Neither reason is a problem. Together they tell you what concerns the buyer, and that tells you where there is room to negotiate. If the rollover is mainly about the price, a larger cash payment and a smaller stake may be possible once the buyer has seen more of the business. If it is mainly about keeping you, the terms of your role after the sale matter as much as the shares.

Action step: Ask the buyer to set out in writing why they want you to keep a stake. The answer shapes everything you negotiate next.

2) When Does the Stake Turn Into Money?

The 80% arrives when the sale completes. The 20% arrives when the buyer's business is sold, or when someone buys your shares from you, and you directly control neither outcome.

Owen's letter mentioned four or five years. When he asked what would happen if the group's investors chose to hold on longer, or sold in a weaker market, the answer was that his shares would wait with theirs.

That question matters more than it used to. In its review of the first half of 2026, PwC notes that private equity investors are holding businesses for longer, with fewer sales of the businesses they own.

Plan as though the stake may take longer than you are told and be worth less than the projection. If the upfront cash covers what you need for the next ten years, the rollover stake is a second payment with real potential. If you need the stake to pay out before you can retire as planned, you are taking a risk on a business you will no longer run.

Founder Insight: "Count the cash, not the projection." Owners tend to add the two figures together and think of the total as the sale price. I'd recommend treating only the cash as the price, and the stake as a separate investment you have chosen to make. Then ask yourself whether you'd put that sum into this business, on these terms, if you had the money in the bank today.

3) Where Do Your Shares Sit, and What Can You Control?

Owen's shares would be in the new company the group was setting up to buy his business, and that company would itself sit under the group's holding company. He would own part of his old business again, with the group holding the rest.

That leaves the value of his stake in the group's hands. The group decides how the new company is funded, what it pays the rest of the group in charges, and when and how it is sold. Three sets of terms decide what the stake is worth to you.

Buyers often fund the new company partly with loans, from a bank or from elsewhere in the group, which are repaid with interest before shareholders receive anything. The group may also hold preference shares, which are paid out before ordinary shares. If your shares sit behind those, the loans and preference shares are repaid first, and a modest sale can leave ordinary shares worth very little.

Owen asked for a worked example showing what his shares would receive if the business, or the group, sold for a disappointing figure, the expected figure and a strong one. The first of the three was sobering, and it changed what he asked for.

Check the leaver terms: what happens to your shares if you stop working in the business. A "good leaver", such as someone who retires on an agreed date or leaves through ill health, may keep their shares or sell them at full value. A "bad leaver" may have to sell them back at what they cost, or less.

Read exactly who counts as which. An owner who resigns after a falling-out with a new managing director can find that he is a bad leaver, and that most of the value he rolled over goes with the job.

A drag-along right lets the majority require you to sell your shares when they sell theirs. A tag-along right lets you join a sale on the same terms if the majority sells. You want the second. Expect to be asked to accept the first, and make sure the terms it can force on you are the same as everyone else's.

Ask too what you will be told as a shareholder, and how often. Owen asked for quarterly accounts and an annual meeting with the group's finance director.

🚩 Diligence Flag: "The stake that shrinks." If the new company issues more shares later, for example to fund another purchase, your percentage falls unless you can buy some of them. Ask whether you will have the right to take up new shares, and whether any later money will rank ahead of yours. Settle this before the main terms are signed, while the buyer still needs your agreement.

4) How Is the Stake Taxed?

Owen assumed he would pay tax on the whole price when the sale completed. His accountant explained that the shares are treated differently.

When part of the price is paid in shares in the buying company, the tax rules usually treat that part as not yet sold. Your new shares take on the date and cost of your old ones, and the gain is taxed when you sell the new shares.

That can help, because you are not paying tax on money you have not received. The difficulty comes at the later sale. Business Asset Disposal Relief, the reduced rate of capital gains tax on qualifying business sales, depends on conditions such as holding enough of the company and working for it. HMRC's own guidance gives the example of an owner who swaps her shares for a small stake in a much larger company: when she later sells, the relief is unlikely to be due, because it is not her personal company or she may no longer work there.

There is an election that treats the rolled shares as sold at the time of the exchange, so the relief can be claimed on that gain straight away, at the rate in force when you make the election. The deadline is the first anniversary of the 31 January after the tax year in which the sale takes place. The cost is tax paid now on shares you cannot yet sell.

Which route is better depends on your own figures and on the tax rules at the time of your sale. It is a decision for your tax adviser, and worth making before the split between cash and shares is agreed.

Action step: Ask your tax adviser to set out your tax bill both ways, deferring the gain and electing to pay it at the sale, before you agree how much of the price comes as shares.

5) Do You Want to Work for This Buyer?

Owen's contract for the years after the sale gave him a title and a salary. It didn't say who he would report to, which decisions he could still take, or what would happen if the group merged his business with another one it bought.

Once you keep a stake, someone else runs the business you are invested in. Meet the people you would answer to. Ask how they have treated other owners who stayed on, and ask to speak to one. A buyer confident in its record will arrange it.

What Owen Agreed

Owen didn't turn the offer down. He went back with three changes.

The cash share rose to 85%, after the group had spent time with his managers and saw that the contracts depended on him less than they had thought. His shares ranked equally with the group's, with the worked example set out in writing. Retiring after two years would make him a good leaver.

His accountant modelled the tax both ways, and Owen chose to defer the gain, knowing what it might cost him at the later sale. He signed knowing which part of the price he could count on, and what the rest might be worth.

If a Buyer Has Asked You to Keep a Stake

A rollover can give you a second payment for work you have already done. Whether it does depends on terms settled early, while the buyer still needs your agreement.

That's what The Offer Review is for. We look at the offer from your side: what you would receive and when, where your shares would sit, what you would be committing to after the sale, and which terms are worth going back on. Our fee for this advice never depends on a sale happening.

Owen is a fictional composite, drawn from situations common to owner-managed businesses.

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Disclaimer

Exit Strategy & Solutions Ltd is not authorised or regulated by the FCA. We do not give legal, tax, insurance or regulated financial advice.

This is general information, not advice on your own circumstances.