Does your firm have a playbook for aligning management interests with those of investors?
We are flexible as to how our portfolio companies achieve alignment with investors across management ranks; however, every approach shares the same DNA. First, we ensure that there is a clear strategic plan for value creation based on the investment thesis for the original investment.
In the case of founders (sellers) who wish to stay on and help drive growth post acquisition, we look for a substantial commitment via “rolled” equity—somewhere in the 20% to 35% range. We want these highly successful entrepreneurs—now our partners—to understand that their “second bite at the apple,” combined with the proceeds from the original transaction, can generate significantly more personal wealth than what they had hoped to achieve from the original sale.
Upon closing, we work with our partners to refine the strategy and translate it into annual plans with specific operating and financial goals. Managers participate in shaping the annual plan and those with equity clearly have a stake in achieving those plans.
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November 16, 2020 at 11:11PM
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When Owners Roll: Creating Alignment Between Management and PE - Middle Market Growth
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