What HOA Management Company Owners Should Know About Their Second Liquidity Event

When a management company owner sells their business, most of the attention goes to the initial sale price. But what many don’t realize (until it’s too late) is that the second liquidity event can be just as important.

Whether you retain a minority stake in your own company or roll equity into a larger platform, that ownership comes with rights, risks, and eventual outcomes. The fine print matters, and understanding it can help you make a smarter decision about which buyer to choose.

Retained vs. Rolled Equity: Know the Difference

Retained equity means you keep a portion of ownership in your existing company post-sale. Rolled equity typically means you exchange a portion of your ownership for shares in a larger entity, such as a private equity-backed platform company.

Both are common in deals today, especially when PE firms are involved. And in both cases, you’re not just selling, you’re becoming an investor in the buyer’s long-term plan.

That future payout, or your second liquidity event, may come when the buyer sells again, recapitalizes, or goes public. But timing, valuation, and structure are all out of your hands. That’s why it’s critical to ask the right questions upfront.

Key Considerations: Timing, Rights, and Risks

Not all equity is created equal. Before you sign a deal, take time to understand the following:

• Timeline to exit: Ask the buyer when they expect their next transaction. Is it in two years? Five? Longer? Your capital may be tied up for that full duration.
• Tag-along and drag-along rights: These determine your ability to sell your shares when the platform exits, or if you're required to. Ideally, you want tag-along rights that allow you to sell on the same terms as the lead shareholders.
• ROFR (Right of First Refusal): Many buyers include ROFR language that gives them or the platform the right to buy back your shares before you can sell them to a third party. While common, these terms can severely limit your ability to exit on favorable terms.
• Information access: Will you get regular updates on performance and valuation? If not, you may be flying blind on what your second exit might look like.
• Incentive alignment: How does your second exit align with the buyer’s goals? Is the platform pushing for long-term growth or a quick flip? Knowing this helps you evaluate the risk-reward profile of your retained stake.

Why This Matters When Vetting Buyers

Buyers may offer similar headline prices, but very different equity structures. Some will give you real upside and transparency. Others may limit your rights, restrict your liquidity, or hold your capital longer than you expected.

That’s why it’s not enough to compare initial LOIs based only on cash at close. The retained or rolled equity piece could end up being your biggest future asset or your biggest regret.

The most successful sellers take time to:

• Ask detailed questions about the buyer’s future plans and exit strategy.
• Review equity documents with experienced M&A advisors.
• Understand the governance rights tied to their ownership.
• Ensure they aren’t accepting illiquid shares with no real path to exit.

Buyers who are vague or dismissive when asked about these topics often signal poor alignment or limited respect for seller interests.

Final Thoughts

If you're thinking about selling your HOA or condo management company in the next few years, now is the time to understand not just how much you're getting, but how and when you'll get the full value.

Retained and rolled equity can be powerful wealth-building tools, but only if structured well. Don’t treat your second liquidity event as an afterthought. Ask the right questions, vet your buyer thoroughly, and get experienced advice to help you navigate it.

At CAM Advisors, we help owners evaluate deal structures, explain equity mechanics in plain English, and guide you through both the first and second exit. If you’re considering a sale, we’re here to help you make the smartest decision for your future.