Deal structure
Incentive equity is ownership offered to managers so they share in the company's growth, usually as options or a share pool.
Incentive equity gives key managers a piece of the company. If the business grows in value, they earn more. It links their rewards to the owner's goals.
For example, a company sets aside a 10% pool for its leaders. A buyer later sells the company for more than it paid. Managers who hold shares receive a share of the gain.
Incentive equity matters in a sale because buyers want your team to stay. A good plan helps keep strong people. Buyers may add or reset a pool after closing. You may also have a role in who receives it.
Terms vary. Vesting, strike prices and tax treatment differ by plan, so ask your tax adviser and lawyer. Think of it as one tool to keep staff in place; see the retaining management and key employees guide. Related terms are rollover equity and value creation.
Related terms
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