Seller Remorse Over PE Rollover Equity: A Lesson in Rollover Equity Disclaimers

PE firm Clayton Dubilier & Rice, LLC (CDR) and its portfolio company Artera structured a $700MM utility construction company purchase for a combination of cash and rollover equity. When the value of that rollover equity was far less than what was represented, the sellers sued, alleging misrepresentation and fraud.

In Feeney Brothers Excavation Trust et al v. Artera Services Holdco, LLC et al, decided on July 31, 2026, Delaware Vice Chancellor Winston rejected the seller’s claims because CDR had a typical anti-reliance clause in the rollover equity agreement, limiting representations only to the four corners of the agreement.

The sellers of Feeney Utility Services Holdco, LLC (FUSH) had two bids: one was a higher all cash offer, and Artera’s lower cash offer with rollover equity. The sellers allege that CDR and Artera represented in pre-sell negotiations Artera’s stock value of $160/share and Artera stock would 2X or 3X as Artera went to IPO. Based on these representations, the Seller went with Artera’s offer.

After its purchase, CDR further leveraged Artera in a $2B debt refinancing. As part of that CDR invested into Artera at $.08 per share, a far cry from the $160.00 per share the FUSH founders paid, rendering their “$30MM” rollover equity virtually worthless.

The sellers then sued based on reliance on the representations made prior to their sale to Artera; however, Artera expressly had an anti-reliance clause that excluded seller’s reliance on any representations made outside the agreement.

The court said:

“Delaware courts will honor clauses in which sophisticated parties disclaim
reliance on extra-contractual representations.” “To be effective, a contract must contain language that, when read together, can be said to add up to a clear anti-reliance clause by which the plaintiff has contractually promised that it did not rely upon statements outside the contract’s four corners in deciding to sign the contract”…a “critical” feature of an effective anti-reliance clause is that it “must come from the point of view of the aggrieved party (or all parties to the contract).”…”if a party represents that it only relied on particular information, then that statement establishes the universe of information on which that party relied.”

The Sellers erred in 1) their diligence and negotiation on the rollover equity and 2) the negotiation of reps and warranties on the value of the rollover equity. These should have been completed at the term sheet level, and absent receiving acceptable assurances, they should have gone with the higher cash offer. As the Delaware court has said previously:

“[C]ourts should be most chary about implying a contractual protection when the contract could easily have been drafted to expressly provide for it.”

Jerome Fogel is a founding partner of Fogel & Potamianos LLP, a firm recognized by Chambers & Partners’ California Spotlight Guide for excellence in corporate law. A partner in the Corporate Practice Group and Chair of the Sports & Entertainment Group, he is known as an innovator and dealmaker in the legal community. He serves as a general counsel to privately held companies with a specialty in mergers and acquisitions.

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