Lateralling - Deferred Comp Buyout?
Hi all - quick question for those who have lateralled to a competitor (think BB to BB or BB to EB) - how has deferred compensation been dealt with? I'm currently an associate 3 and have had 3 years of deferred comp accrued (rolling 3 year vest, portion paid out in cash with each bonus cycle).
How are these typically handled by your new employer:
- I assume they'll make you whole on the full amount?
- If lateralling to a publicly-traded bank, do they typically match the market value of your unvested shares with market value of their own shares, and roll your vesting program into their vesting program? [e.g. does it reset the clock]? How much negotiating room do you have around this?
- If moving to a private bank, do they pay you out in cash / assume the full amount is vested right away?
Thanks
Based on the most helpful WSO content, here's what you need to know about deferred compensation buyouts when lateraling:
Making You Whole: It's common for the new employer to "make you whole" on your deferred compensation. This means they typically compensate you for the unvested portion of your deferred comp to ensure you don't lose out financially by making the move.
Publicly-Traded Banks: If you're moving to a publicly-traded bank, they often match the market value of your unvested shares with their own shares. These are then rolled into their vesting program. However, this may reset the vesting clock, meaning you'll need to adhere to their vesting schedule moving forward.
Private Banks: When moving to a private bank, the approach can differ. They may pay out the deferred compensation in cash or treat the full amount as vested immediately. This is often negotiated on a case-by-case basis.
Negotiation Room: There is typically some room for negotiation, especially if you're a strong candidate. Factors like the size of your deferred comp, the policies of the new employer, and your leverage in the hiring process can influence the outcome. It's advisable to discuss this upfront during the offer stage to avoid surprises.
If you're considering a move, ensure you fully understand the terms of your current deferred comp and how it will be handled by the prospective employer.
Sources: First timer introduced to Co-invest + Carry: How to navigate?, Minimum Time Before Lateralling?, Would you make this move?, Keeping Management Motivated Post-Exit
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If the bank you move to is publicly traded, they will convert your unvested shares into their stock, vesting on the same schedule
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