Understanding equity

Reinvesting a portion of the proceeds from a practice sale into the acquiring or parent company instead of receiving the entire amount in cash at closing. 

The process of determining what a company’s shares are worth at a particular point in time. 

A transaction between independent parties acting in their own interests, without a relationship that could improperly influence the price or terms. 

Past transactions involving similar companies or assets that are used as reference points when estimating value. 

A category of shares with defined rights, privileges, and restrictions. Different classes may have different voting rights, dividend entitlements, or payment priorities. 

The order of a company’s debt and equity financing. It helps determine which investors are paid first and how proceeds are distributed in a sale or other liquidity event. 

A financial measure used to estimate the annualized rate of return on an investment over time, based on the timing and amount of cash flows. 

The highest-level parent company in a corporate structure. Equity in TopCo generally provides exposure to the performance of the broader organization rather than only one practice. 

An ownership interest that a seller continues to hold in a practice or company after a transaction.