What determines the management's implied ownership during an exit event?

The correct answer is related to how equity is represented in an exit event. In private equity or venture capital contexts, when a company is sold or goes public, the management team's implied ownership during this exit is significantly influenced by the proportion of rollover equity they hold compared to new equity raised for the event.

Rollover equity refers to the portion of the management's investment that they choose to retain in the company after an exit, which often includes their share after a capital event like a buyout or IPO. This contrasts with new equity, which is the capital injected into the company, typically by new investors during that exit.

When assessing implied ownership, understanding the balance between the rollover equity and the new equity is crucial because it directly affects how much stake management retains in the company post-exit. If the rollover equity is a larger proportion relative to new equity, management maintains a more significant influence and share in the company, thereby reflecting greater ownership.

In contrast, other factors listed do not play as direct a role in determining management’s ownership. Total equity contributions measure the amount originally invested but do not necessarily dictate the ownership stakes at the time of exit. The predefined exit strategy could establish a framework for how and when to exit, but it doesn't influence ownership percentages