Management Pool in LBO - Excel
How do you treat the cash proceeds received from excercising the management pool options (awarded) at exit in an lbo model
Is it distributed to: 1. both sponso and management - I think this is the case as the cash from exercise essentially becomes distributable equity value?
Only sponsor - this makes less sense to me
Ignore it (assuming is cashless exercise)
This is for a LBO interview case study
For reference, here is the example
Equity entry: 100mm Equity at exit: $300mm Mgmt option pool: 5%
Cash from option exercise: $5mm (100*5%; strike price is set at 1x initial investment)
Distributable Equity Value: $305mm
Sponsor equity: 95%*$305mm Mgmt equity: 5% * $305mm
could someone please clarify?
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