Earnouts, rollover equity and employment agreements for clinician owners
What is an earnout in a healthcare practice sale? It is extra payment you may receive if the practice hits agreed targets after closing. Alongside rollover equity, seller notes, holdbacks and employment agreements, these terms shape how much you actually receive and what you commit to after the sale. They show up often when comparing private equity, strategic and individual buyers.
What is an earnout?
An earnout is additional payment you earn if the practice hits agreed targets after the sale, such as revenue or profit.
- Ask how targets are defined and measured.
- Ask who controls decisions that affect the target.
- Ask what happens if the buyer changes the business.
What is rollover equity?
Rollover equity means you keep part of your ownership by reinvesting some proceeds into the buyer.
- You may share in future growth when the buyer sells.
- Your stake can lose value.
- Ask about the buyer's plan, debt and when you can sell your stake.
What is a seller note?
A seller note is a loan you give the buyer, repaid over time.
- Ask about interest, security and what happens if the buyer misses payments.
What is a holdback or escrow?
A portion of the price is held for a period to cover claims.
- Ask how much, for how long and what triggers a release.
What belongs in the employment agreement?
- Length of your commitment after closing
- Role, schedule and compensation
- What happens if you are terminated
- Performance expectations tied to earnouts
What are non-compete and non-solicit terms?
- Duration and geography
- Which activities are restricted
- Rules differ by state and may limit enforceability
What is a working capital adjustment?
The price may adjust based on the practice's cash and receivables at closing.
What are representations and warranties?
Promises you make about the practice. Breaches can lead to claims.
Frequently asked questions
Is more cash at closing always better?
Often, because it is certain. Compare risk and upside.
Can I negotiate these terms?
Yes. Much of the value in a deal is in the terms.
How Lineage helps
Lineage advises owners through deal terms and negotiation. For the full path from valuation to close, see how to sell a therapy practice. Get a free estimate.
This is general information, not legal, tax or financial advice.