The Doctor Who Stays—Earnouts, Buybacks, and Equity Rolls
When a dentist sells a practice and stays on for the next chapter, three things can be in their deal that look similar from across the room and behave very differently up close.
The earnout. The equity rollover. The buyback.
Each one promises some flavor of "more money later, if things go well." Each one is a different financial instrument with different math, different risks, and different consequences for what your post-close life looks like.
I want to walk through each one honestly, because the difference between getting these right and getting them wrong is often six or seven figures.
Let's get into it.
1. Why You'll Be Asked to Stay
Most dental practice sales — especially to DSOs, group buyers, and private-equity-backed platforms — include some form of post-close commitment from the seller. Three to five years is typical. The reasons are practical:
The patient base trusts you, not the new logo on the door. If you walk on day 91, attrition spikes
The team works for you. Replacing institutional knowledge is expensive and slow
Production continuity matters for the buyer's underwriting model. They projected the next three years of revenue partly on the assumption you'd be around producing
So they want you to stay. And to motivate you to stay productively, they construct deal structures that pay you over time, contingent on outcomes. That's where earnouts, rollovers, and buybacks live.
This is not a trick. It's a legitimate part of how these transactions get priced. But the structure of those instruments determines whether you actually capture the value the buyer is dangling.
Action Items / Food for Thought:
Ask any potential buyer, on the first call: "How long do you typically need the seller to stay?"
The answer ranges from 6 months (rare) to 5 years (common in larger DSOs)
Match that against your honest answer to "how long do I want to keep practicing here under different ownership?"
2. The Earnout — Money Tied to Performance
An earnout is a portion of the purchase price that you only receive if the practice hits specified financial targets after closing.
A typical structure: 10-20 percent of the headline purchase price is held back, payable over 1-3 years, contingent on the practice hitting revenue, EBITDA, or other agreed metrics.
The promise: if the practice performs as expected, you get every dollar.
The reality: earnouts are a leading reason post-close sellers feel they got less than they signed up for. Reasons earnouts go sideways:
The metrics are defined in ways the buyer can influence (e.g., the buyer adds expenses to your P&L that drop "your" EBITDA)
The targets are set ambitiously enough that hitting them requires the buyer's full cooperation, which doesn't always materialize
Buyer-controlled changes (operational, pricing, staffing) reduce production during the earnout window
Disputes about whether targets were met turn into legal proceedings that aren't worth the cost to pursue
I'm not saying don't take an earnout. I'm saying: be very, very specific about the math. The metric definitions, the calculation methodology, the buyer's permitted adjustments, the dispute process — every line matters.
Action Items / Food for Thought:
For any earnout, get the detailed metric definitions in writing before LOI
Negotiate floor protections: the seller's earnout cannot be reduced by buyer-initiated cost increases
Have your accountant model the earnout against three scenarios (base, downside, severe downside) before you accept the structure
3. The Equity Rollover — Real Equity, Real Risk
An equity rollover is when, instead of all cash at closing, you accept a portion of the purchase price as equity in the buyer's parent company.
A typical structure: 20-30 percent of your sale proceeds are converted into equity units in the DSO or platform. You become a shareholder. When the platform sells (typically 3-7 years later), you participate in that exit at the same multiple — the "second bite at the apple."
The promise: if the platform grows and exits well, your rollover equity could be worth substantially more than the cash you would have received.
The reality: this is real equity. It can grow. It can also be diluted, restructured, or worth less than face value. Things to know:
The valuation at which your rollover is priced matters enormously. A rollover at the platform's "current valuation" (set by the same buyer pricing your practice) is not necessarily the same as the price an independent investor would pay for the same shares
Rollover units typically have liquidity restrictions: you can't sell them on demand, you wait for the platform exit
Future capital raises by the platform can dilute your ownership percentage (usually somewhat protected by anti-dilution provisions, but not always)
The platform's growth depends on factors you don't control: management quality, market conditions, capital structure
This is not a risk-free return. It's a leveraged bet on the buyer's growth thesis. Sometimes those bets pay off spectacularly. Sometimes they don't.
Action Items / Food for Thought:
Before agreeing to a rollover, get the platform's audited financials and capital structure
Ask about prior raises, prior dilutions, and the path to exit
Understand what your rollover percentage represents at the platform level (10 basis points of a $500M platform is meaningful; 10 basis points of a $50M platform is less so)
Have your CPA AND a securities-savvy lawyer review the rollover terms before LOI
4. The Buyback — A Lesser-Known Option
A buyback structure is when the seller has the right (or obligation) to repurchase a portion of the practice from the buyer at a future date — typically tied to the seller's continued employment.
This is less common but worth knowing about. Some structures:
A retention bonus structured as a buyback right at favorable pricing if the seller stays through year 3 or 5
A clawback that allows the buyer to repurchase the seller's ongoing equity at a discount if performance milestones aren't hit
A symmetric buyback that creates an exit ramp for the seller if they want to leave early, at agreed valuation
These are negotiable instruments and they vary widely. They're worth raising with your advisor because they can be useful tools — particularly if you're not 100 percent sure about staying for the buyer's preferred timeline.
Action Items / Food for Thought:
If you're uncertain about a long stay-on commitment, ask whether the buyer would consider a buyback structure
Buybacks favor sellers who want flexibility; buyers prefer to avoid them, so expect resistance
Don't expect generic templates. Each buyback is custom-negotiated
5. Stacking the Three — How Real Deals Look
Most practical deals use combinations. A typical mid-market dental sale to a group buyer might look like:
70 percent cash at closing
25 percent equity rollover at the platform level
5 percent earnout based on a 12-month revenue target
That's a relatively seller-friendly structure. Less seller-friendly versions might be:
50 percent cash at closing
30 percent rollover (with restrictive terms)
20 percent earnout (with aggressive targets)
The headline multiple on these two looks similar. The actual realized cash, depending on how the rollover and earnout play out, can be wildly different.
This is where representation matters. The buyer's investment bankers know exactly how to construct these stacks to maximize their realized economics. Sellers without sophisticated representation tend to leave value on the table — not in the headline number, but in the deal structure.
Action Items / Food for Thought:
For any deal, ask your advisor to model "expected realized proceeds" under base, downside, and severe downside scenarios. Don't focus only on headline multiple
A lower headline multiple with cleaner cash and less earnout risk often nets more than a flashy multiple with rollback structure
Negotiate the full stack. Each piece is a separate negotiation with its own leverage points
6. The Personal Question Underneath the Math
Here's the part that doesn't make it into financial models.
Earnouts and rollovers tie your post-close life to the buyer's success. That sounds fine in the abstract. In practice, it means:
You'll care about decisions you no longer control
You'll have opinions about staffing, pricing, equipment, and protocols that don't get implemented
You'll watch your "second bite" depend on people you didn't choose to work with
You'll feel financial pressure that's tied to your continued employment
Some sellers thrive in this dynamic. Some find it demoralizing. The honest pre-conversation with yourself is: how much do I want my financial outcome to be tied to ongoing entanglement with this practice?
If the answer is "not much," you should be willing to take less headline number for cleaner cash at closing.
If the answer is "I'm genuinely excited about the platform and I want to be part of building something bigger," then leaning into rollover equity makes sense.
There's no right answer. Just an honest one.
Action Items / Food for Thought:
Before the LOI, ask yourself: in the worst case scenario where the rollover is worth zero and the earnout pays nothing, am I still satisfied with the cash-at-closing portion?
If not, that means the structure is wrong for you, not the multiple
If yes, the contingent portions are upside, not necessity
Final Thought
The seller who stays after a sale is signing up for a different relationship with the practice. Not better, not worse — different. The financial instruments that come with that relationship — earnout, rollover, buyback — each have their own math and their own risks.
Don't let a headline number distract you from the structure. The headline number is what's promised. The realized number is what shows up in your account, sometimes years later, after a lot of variables you don't control have played out.
The right deal for you depends on what you want the next chapter to look like, how confident you are in the buyer's growth thesis, and how much risk you're willing to carry post-close.
Get the math right. Get the math reviewed by people who do this for a living. And then make a decision that fits your life, not just your tax bracket.
If you want a careful walk-through of any deal terms you've been offered — or you want to think through what the right structure would look like for a practice like yours — that conversation is on us. No commitment.
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