CEO packages for running PE Portfolio companies
Discussion
Hello all
I am about to start negotiating a CEO package to run a private equity funded portfolio business.
It is currently quite a small concern but the industry is very much on the ascent and the business holds some good IP.
Does anyone on here have any experience of negotiating such a package that could shed some thoughts / ideas on the make up of such a package.
Salary and perks like healthcare / car /pension are clear but how should I approach annual bonus and also long term incentives such as vested equity?
I’d also like to get a feel of %’s and anything else I may have not thought of
Many thanks
GG
I am about to start negotiating a CEO package to run a private equity funded portfolio business.
It is currently quite a small concern but the industry is very much on the ascent and the business holds some good IP.
Does anyone on here have any experience of negotiating such a package that could shed some thoughts / ideas on the make up of such a package.
Salary and perks like healthcare / car /pension are clear but how should I approach annual bonus and also long term incentives such as vested equity?
I’d also like to get a feel of %’s and anything else I may have not thought of
Many thanks
GG
There are specialist that will negotiate on behalf of management on such deals, we are currently engaged with one.
Some very general points
Base salary at mkt rate, typical exec perks such as medical, pension, car (but nothing extravagant)
No annual bonus unless you are very lucky
The big reward is equity.
Depending where the PE house in its hold cycle (and the typical hold length)
The management could be allocated 20% of the sweet equity - this is only the upside, I.e if business was bought for £100m, and over 4 years added £25m in delayed interest payments, plus and additional £25m for acquisitions etc - but then gets sold for £250m.
The management will share out £20m - with typically the CEO taking half the pot (£10m)
However if the co sells for £150m there is no upside, therefore equity is worth nothing.
Some very general points
Base salary at mkt rate, typical exec perks such as medical, pension, car (but nothing extravagant)
No annual bonus unless you are very lucky
The big reward is equity.
Depending where the PE house in its hold cycle (and the typical hold length)
The management could be allocated 20% of the sweet equity - this is only the upside, I.e if business was bought for £100m, and over 4 years added £25m in delayed interest payments, plus and additional £25m for acquisitions etc - but then gets sold for £250m.
The management will share out £20m - with typically the CEO taking half the pot (£10m)
However if the co sells for £150m there is no upside, therefore equity is worth nothing.
I’d argue that the picture is a little broader than that.
What you can secure will depend to a degree on:
1) The company - stage, strength of IP, bench strength
2) The sector - size of opportunity, competitors, success factors
3) The PE investor(s) - who they are, size of holding, valuation, degree of control, exit timing/expectations
4) The other shareholders - as above
5) Why they (company/stakeholders) want *you* - is it something special they want/need, or just a safe pair of hands
6) What they want you to deliver
7) The resources at your disposal
There’s a huge difference between an early stage company that needs beefing up, one where the founders have suddenly left a vacuum, and one that is on an IPO track... very hard for anyone to comment properly without knowing a lot more.
What you can secure will depend to a degree on:
1) The company - stage, strength of IP, bench strength
2) The sector - size of opportunity, competitors, success factors
3) The PE investor(s) - who they are, size of holding, valuation, degree of control, exit timing/expectations
4) The other shareholders - as above
5) Why they (company/stakeholders) want *you* - is it something special they want/need, or just a safe pair of hands
6) What they want you to deliver
7) The resources at your disposal
There’s a huge difference between an early stage company that needs beefing up, one where the founders have suddenly left a vacuum, and one that is on an IPO track... very hard for anyone to comment properly without knowing a lot more.
Be careful about share options and equity on sale.
There was one on linkedin where he had 1% shares company sold for 100 million, he expected to get 1 million but he got nothing despite the sacrifices ha made in helping grow the business
due to rounds of funding and allocation of shares and contracts that they got there money out first,
I will try and find the original post.
There was one on linkedin where he had 1% shares company sold for 100 million, he expected to get 1 million but he got nothing despite the sacrifices ha made in helping grow the business
due to rounds of funding and allocation of shares and contracts that they got there money out first,
I will try and find the original post.
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