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Course Details

This CLE webinar will discuss the structuring of equity-based incentives in companies that have private equity investment. The panel will discuss design considerations and standard features of equity and equity-based compensation programs, including vesting and forfeiture, distributions, restrictive covenants, repurchase rights, and monetization events and liquidity opportunities. The panel will provide information helpful to companies that are private equity-backed, as well as those that are seeking private equity investment.

Faculty

Description

Equity-based incentives can be critical to retaining key personnel and aligning management with a company's private equity investors. But the design, legal considerations, and personal impact on employee participants can be complex.

Private equity investors and company management should have a mutual interest in designing equity incentives that are aligned with a return on investment for the private equity investors and a meaningful opportunity for the participants to share in value creation. Typically, private equity investors will control the decisions regarding the overall size of the incentive equity pool, individual grant size, and terms and conditions of the program. The company's legal structure and organizational documents may limit the equity instruments available for the incentive program, as well as the timing and amounts of distributions and/or liquidity.

A key term of equity award design is the vesting structure. Vesting can be time-based, value-based (or a combination of the two), or event-driven. Companies should consider whether vesting schedules provide employee participants with the incentive to remain with the company, and whether awards can be retained beyond termination of employment or to a future sale. Award design should also keep in mind the potential desire, in a sale context, of a buyer to have management convert (or rollover) a portion of the proceeds from their incentive equity to the post-sale company in order to align their interests with the buyer.

Private equity-backed companies are also starting to implement broad-based employee "ownership" programs, which often take the shape of transaction bonuses tied to company performance at the ultimate exit by the private equity investor. These programs have become popular among U.S. private equity investors and have been a way to recreate the feeling of ownership across the employee base while avoiding significant legal and tax implications of granting "real" equity interests to a broad and often global employee population.

Listen as our authoritative panel discusses these and other issues related to equity-based incentives in private equity-backed companies.

Outline

  1. Overview: goals of PE investors and management in structuring equity incentives
  2. Vesting schedules and conditions
  3. Distributions
  4. Restrictions placed on incentive equity holders
  5. Repurchase rights
  6. Monetization and liquidity
  7. Broad-based employee "ownership " programs

Benefits

Hear insights from practitioners who are designing and negotiating private equity-backed equity incentive programs on a continuous basis in the real world. The panel will review these and other critical issues:

  • How should equity incentives be designed to reflect company performance and value?
  • What conditions and restrictions are typically placed on incentive equity?
  • What are the potential points of tension between incentive equity holders and private equity investors?
  • How much does exit strategy figure into the vesting schedule for incentive equity?