Screwed on Carry
I work at a shop that does deal by deal carry. I had an agreement that I'd negotiated for 7.5bps carry with the agreement that 3 months into the job we'd look at my performance and bump up to 10bps which I assumed was a shoe in based on the conversation. As part of this construct my offer was written to have 5-10bps and each deal has a 4 year vest.
I receive my docs on deal 1 and it's only 5bps because the pool was "small" although I see I still only got 1% of the pool as one of 3 IPs (we have a lot of operators). On top of this turns out while it "vests" over 4 years it's actually paid out as a cash bonus (ordinary income tax not capital gain) on exit and if you're not employed at exit you get zero dollars. If you exit the investment in less 4 years (huge success) they literally withold the carry payments so it's worse of both worlds.
This is super frustrating and feel like I've been yanked around and misled on this stuff but given I joined <6 months ago I feel like I might be stuck and have to wait to not look like I always jump jobs (last 2 were 1.5 yrs each)
Any advice?
I'm sorry to hear what you're going through. If it helps, a lot of people have walked in your shoes, including myself.
Beyond the pride element and feelings of getting your time wasted, how much dollars did you really stand to gain? Take a step back because when we are talks bps and not percentage points it isn't a lot of money unless you're working at a mega fund, which I doubt this is since it is deal by deal.
Deals are $50-250M each. Supposed to deploy roughly $500M per year although I think $300-400M is more likely.
For this deal the delta was $200k DAW vs $100K DAW.
An Executive Compensation Lawyer is going to be your best friend in any new role with carry in your case. Post-PE Associate roles I've been using one on any new job that in my case has equity or is part of the MIP (PortCo side).
K&L Gates is who I use.
What do you use them for? I feel like the issue is always offer letters don't come with actual carry docs to review and when you get the docs it's always sign or get nothing
That is often the case, yes. But hiring an attorney to review the docs is still useful because it allows you to make an informed decision. You may not be able to get better terms but you will at least know what you are getting into
Painful lesson that you shouldn't leave these things up to chance - if carry is a meaningful part of your agreement, it needs to be part of your offer docs. Understand it is deal-specific, but there is no reason you should just now be figuring out the vesting terms or having a huge range of bps. It should have said in writing 7.5bps on deal 1, to be reevaluated in 3 months and raised to 10bps depending on performance criteria 1, 2 and 3 (or at least upon receiving at least a satisfactory performance review at year-end)
Luckily this doesn't seem like a massive amount of money to be losing out on, so when you're more senior you know to simply will walk away if teams won't give you the full picture prior to signing. Up to you if you want to stay but I think if you make it to at least a year you can move without huge questions (assume your previous jobs were IB, or getting to IB and the moves made sense - some leeway there)
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