Deal structure question
Hi guys,
How do you guys document an acquisition when you want existing shareholders to be bought out and management & staff to have be on a 2-3 year retention plan based on some metrics such as EBITDA generation?
Say $50m total consideration, split 70/30 between buyout of shareholders and retention.
Ie: how do you make sure shareholders will not be entitled to the earnout?
Thanks
Based on how I understood your question, you can buy out shares of existing shareholders and set up a bonus structure for management that is linked to EBITDA or create a different/additional class of shares.
Thanks. So there the deal structure to acquire the company and the retention part are done separately.
I guess you mean a MIP.
Management Incentive Plans are what new owners put in place to incentivise management and on these they specify the amount mgmt will invest (if any, and usually very small ticket) and then their estimated returns which will be based on a metric (I.e. could be MoM for the total business). You will have to account for MIP impact on investors returns tho (IRR pre and post MIP payout).
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