Corp. Dev. bonus structure

Hi Guys,

could you elaborate how usually are these bonuses cauculated? 

Are they discretionary or cauculated as a % of the deal done with a cap e.g. 2% out of transaction, but no more than 30% your base salery?

Thank you on advance!

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Comments (12)

Dec 10, 2020 - 11:38am

Yep. At any F500-type company, this is what you should expect. The only exception might be if you're about to get bought by a bigger firm, they might throw a retention bonus your way to ensure you stick around until closing (when you'll likely be laid off).

I can't speak to smaller firms that are deal focused. Generally, doesn't seem like a bonus as a % of deal value or transactions done would be smart as it'd incentivize you to do any deal, not just those that might be financially attractive for the company. 

Dec 15, 2020 - 4:29pm

@SReaper thank you for your elaboration of the topic. Could you explain what are the potential KPIs for the Corp Dev., though? I envisage analyzing dozens of targets and not making any transaction. Does it mean that the job is done wrong or it means that you haven't come across the proper target but you worked hard and deserved the bonus?  Thank you in advanace! 

Dec 15, 2020 - 6:15pm

It's very hard to have an overarching view over all corp dev roles, given they are not as structured as an IB career. It also depends on which KPIs you're asking about, is it the corp dev division or just the team member. From my limited view of friends in the field and working with corp dev people when I was sell side, I don't think any were incentivized on transactions closed (as a start of year KPI), it was more feedback based, working with other teams, not making mistakes, in a transaction managing the process smoothly etc. The only one where I saw some transaction inventive from a corp dev team (although this was only a KPI for the head of corp dev), was when a firm announced several billions of divestments following a business review, so you can say those KPIs for the team head would also flow through to the team members. Maybe other people can comment on their first hand knowledge of these KPIs.

By the way, a corp dev role might not be as cool as you make it sound when you say "analyzing dozens of targets" and then making transactions. In a lot of places, you're not operating like a VC/PE looking for transactions. You may be supporting other teams with the deal process (eg. a business unit in another country noticed a competitor is looking to sell, so they bring corp dev to do some DD and get the transaction done smoothly, or management decided x unit is non-core and wants to sell it, so corp dev reaches out to banks or PE to get the ball rolling and then manages the sale). And in some places, you may be roped in to do scenario analysis or forecasting or strategy presentations for other teams.       

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Dec 15, 2020 - 9:19pm

I think it is called a 14a proxy statement, but you can look up how executive bonuses are structured at any public company. I currently work at a F100 and we have the same structure, but the target amount varies by salary grade. It would not make sense to be compensated on transaction size... imagine a scenario where a transaction occurs but the company is worse off. Not sure how you even thought that would make sense, it would totally misalign incentives for corp dev versus the company. The KPIs are things like EBITDA margin, sales growth, etc. all relative targets and peers. Again look at an 14a and it should become clear how corporate bonuses are structured.

Dec 16, 2020 - 9:10am

@CCPD, so to set the records straight by saying that "the KPIs are things like EBITDA margin, sales growth, etc. all relative targets and peers" you mean how these M&A add-ons whatsoever and their integrations impact the metrics like: EBITDA margin, sales growth, etc, right?

Dec 16, 2020 - 9:19am

No - forget the M&A piece, you are correct that an acquisition could affect those metrices though.

Think of it as a F500 hires an executive compensation / performance consultant. A maximum bonus is set based on salary grades, lets just say $100k, which would be achieved if all KPIs are hit. The consultants put together industry benchmarks that are used to evaluate company performance to peers. Lets just say hitting an EBITDA margin of 15% counts for 25% of max bonus, sales growth of 10% counts for 25% of max bonus, Total Shareholder Return counts for 50% of max bonus. If all metrics are hit, then 100% payout, if only the EBITDA margin were hit then it would be 25% of 100k as the bonus. Then there is the blend of every scenario for doing well on some and below on others. Again the max bonus is going to scale to by pay grade but the payout percentages will be consistent across pay grades. Corp Dev is not IB, there are no 100% base pay bonuses or bonuses based around fees.

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