2015 survey - goodwin/media/files/publications... · 2015-06-17 · we sent out the 2015 survey to...
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RolloveR and IncentIve equIty teRms In mIddle maRket PRIvate equIty
2015 suRvey
2
About This Survey .................................................................................................................4
Executive Summary of Findings ............................................................................................5
I. RolloversScope and Nature of Rollover Securities ................................................................................6
Frequency of Rollover ........................................................................................................6Rollover Required ..............................................................................................................6Size of Required Rollover ...................................................................................................6Size of Required Rollover Related to Size of Deal ...............................................................6Size of Rollover ..................................................................................................................7Size of Rollover Related to Size of Deal ..............................................................................7Key Drivers of Rollover Size ...............................................................................................7Tax Deferred Rollovers .......................................................................................................7
Characteristics of Sponsor Securities .....................................................................................8Sponsor Securities in a Deal with Rollover .........................................................................8Seniority of Rollover ..........................................................................................................8Sponsor Participating Preferred Treatment on IPO .............................................................8Dividends on Sponsor Securities — Priority vs. Pro-Rata ...................................................9Sponsor Dividend Rights ...................................................................................................9When are Sponsor Dividends Paid .....................................................................................9
Terms of Sellers’ Rollover Securities ....................................................................................10Rollover Subject to Call or Forfeiture ...............................................................................10Trigger of Call or Forfeiture .............................................................................................10Put Rights for Rollover Securities .....................................................................................11Put Price ..........................................................................................................................11Other Shareholder Rights for Rollover Securities .............................................................11Drag-Along on Rollover ...................................................................................................12Transfer Restrictions on Rollover Securities ......................................................................12Rollover Board Seats ........................................................................................................13Options and Bonuses .......................................................................................................13Restrictive Covenants for Rollover Investors .....................................................................13
table of contents
Goodwin Procter Rollover and Incentive Equity Survey
3
table of contents
Goodwin Procter Rollover and Incentive Equity Survey
II. Incentive EquityManagement Equity Incentive Pools ...................................................................................14
Size of Pool ......................................................................................................................14Size of Pool Related to Size of Deal ..................................................................................14Size Related to Deal .........................................................................................................14Directors Included in Pool ...............................................................................................14Fully Diluted Equity Pool ................................................................................................15Negotiation of Pool Size ...................................................................................................15Structure of Management Incentive Pool .........................................................................15Use of Profits Interests ......................................................................................................16Profits Interests Allocation................................................................................................16Anti-Dilution for Management Pool ................................................................................17Performance-Based Vesting Criteria..................................................................................17
Options For Incentive Equity ..............................................................................................18Time-Based Vesting ..........................................................................................................18Buy Back of Vested Equity ...............................................................................................18Trigger of Vested Equity Buy Back ...................................................................................18Buyback Price for Vested Equity .......................................................................................19Determination of FMV for Buyback ................................................................................19Acceleration of Vesting on Sale .........................................................................................19Terms of Acceleration .......................................................................................................20Acceleration on IPO ........................................................................................................20Acceleration on Termination ............................................................................................21Subordination to Preferred Dividend ...............................................................................21Conversion of Profits Interests..........................................................................................22
III. About UsAbout Our Private Equity Practice ......................................................................................23 About Goodwin Procter ......................................................................................................23
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This survey is a follow-up to our initial survey, published in 2013, covering terms of rollovers and incentive equity in middle market buyouts and majority recaps. Our initial survey was prompted by the lack of studies or data on these topics. We found this particularly striking given the importance of these topics to private equity investors, entrepreneurs and managers alike, especially in light of the existence of exhaustive studies on other matters such as M&A terms for private acquisitions.
How We Did ItWe sent out the 2015 survey to our network of private equity clients and friends. The survey questions covered a wider range of issues than our 2013 survey, an outcome prompted in part by the responses and suggestions of the 2013 respondents.
Respondents were promised and will receive confidentiality as to both their identities and their specific responses. Our inquiry was limited to transactions involving acquisitions of a controlling interest. There was no focus on any particular industry segment or geography. We received completed responses from over 60 private equity firms.
How It Can Be HelpfulBeing able to cite a study on a particular point rarely, if ever, wins a point for your side on its own. However, the use of such studies can quickly and efficiently convince the other side that your position is not novel, or unheard of, and is within the range of “market.” This study is intended to be a tool to help facilitate discussion of what terms are appropriate in the context of a particular transaction, and more broadly to provide insight into a key aspect of middle market transactions.
More significantly, getting rollover and management incentive equity terms right is one of the principal ways a private equity investor can win over a founder or management team. From the perspective of a founder or manager, rollover and incentive equity are among the most important economic aspects of any deal. Knowing how to structure win-win solutions and the unwritten rules and norms of middle market are therefore critical.
The Future of this StudyWe consider this study a living document that will be updated and expanded periodically over time. We send our thanks to all who helped us with its development. We plan to capture the evolution of trends and along the way to add areas of subject matter that are of interest to the participants in and readers of this study. To that end, if you have not yet participated and would like to do so, or if you would like additional information, please contact either John LeClaire ([email protected]) or Jon Herzog ([email protected]).
about thIs suRvey
Goodwin Procter Rollover and Incentive Equity Survey
5
• Averagerolloverpercentagesrangedfromapproximately16.8%to
nearly28.5%ofpre-transactionholdingsinthetransactionsofour
surveyrespondents.
• Minimumrolloversof18.2%wererequired;theaverageactual
rolloverwas24.1%.
• Rolloversecuritiesrankedpari passuwithsponsorequity
substantiallymoreoftenthannot.
• Rolloversecuritieswerefullyvestedinalargemajorityofour
respondents’transactions,butinsomecasesweresubjecttocall
onterminationofemploymentundervariouscircumstancesusually
involvingdepartureonbadterms.
• Putrightswithrespecttorolloversecurities,bycontrast,occurred
rarelyorneverformostsponsors.
• Sponsorpracticeswithrespectto“rollovers”ofrightssuchas
bonuspayments,options,andthelikevarywidely.
• Theaveragesizeofthemanagementequityincentivepoolsoffered
bythesponsorsrespondingtothissurveywas11.4%,downfrom
12.6%inour2013survey,andwiththepoolsizeasapercentage
ofcompanyequityvaryinginrelationtothesizeofthetransaction
andequityinvestmentinvolved.
• Managementequityincentivepoolsmostcommonlyinvolvea
blendofperformancevestingandtime-basedvestingwiththe
averageperiodfortime-basedvestingbeing4.6years.
• Returnoninvestedcapitalisthemostcommonperformance
vestingmetric(69.6%),withattainmentofEBITDAhurdlesthe
nextmostcommonmetric(30.4%).
• Taxadvantagedprofitinterestsareusedinlieuofoptionswith
increasingfrequency,withonly10.9%ofsponsorsrarelyusing
themand2.3%ofsponsorsneverusingthem,comparedtoour
2013survey,inwhich50%rarelyusedthemand11.4%never
usedthem.
executIve summaRy of fIndIngs
6
FrequenCy oF rolloverWhat is the average percentage of your buyout and majority recap investments that involve rollover equity investments by founders and/or other current owners?
rollover requIreDDo you typically requIre founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
Average
78.2%
SIze oF requIreD rolloverWhat is the average percentage of a minimum rollover requirement (expressed as a percentage of current owners’ pre-transaction equity holdings) in a buyout/majority recap transaction?
Overall Average
18.2%
SIze oF requIreD rollover relaTeD To SIze oF DealIf you require a minimum rollover, what is your typical minimum rollover requirement, if any (expressed as a percentage of current owners’ pre-transaction equity holdings), in a transaction involving an aggregate equity investment of:
$100m or below: 19.3%
>$100m - $500m: 20.1%
>$500m: 14%
scoPe and natuRe of RolloveR InteRests
I. rolloverS
7
key DrIverS oF rollover SIzeWhat drives the determination of the size of rollover investments in your buyouts and majority recaps? (you may choose more than one):
Tax DeFerreD rolloverSare rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
DRIVERS % of RESponDEntS
Desire for current owner “skin in the game”/alignment of interests 93.1%Provide gain opportunity for current owners 75.9%Transaction capital needs 25.9%Fund policy 1.7%Negotiating leverage in the transactions 15.5%Tax considerations 10.3%
SIze oF rolloverWhat is the average percentage of the rollover in your buyout and majority recap transactions?
Overall Average
24.1%
SIze oF rollover relaTeD To SIze oF Dealagain, apart from any minimum rollover requirements, what is the average rollover percentage (expressed as a percentage of current owners’ pre-transaction equity holdings) in buyouts and majority recap transactions where the aggregate equity investment is:
$100m or below: 28.5%
>$100m - $500m: 24.5%
>$500m: 16.8%
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SenIorITy oF rolloverDo sellers’ rollover securities rank pari passu with securities purchased by your fund?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
SponSor SeCurITIeS In a Deal WITH rolloverIn transactions in which there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
SponSor parTICIpaTIng preFerreD TreaTmenT on IpoIf your fund acquires a participating preferred stock (i.e., “double-dip” preferred), do you get your prefer-ence/capital returned as a priority upon Ipo?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
chaRacteRIstIcs of sPonsoR secuRItIes
9
DIvIDenDS on SponSor SToCk — prIorITy vS. pro-raTaIn transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap) or are dividends distributed on a pari passu basis with other equity?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
WHen are SponSor DIvIDenDS paID If you are entitled to preferential dividends, when are they paid?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
SponSor DIvIDenD rIgHTSWhat type of dividend rights do the securities your fund acquires typically carry?
Do you typically REQUIRE founders/current owners to roll over a portion of their equity in your buyout/majority recap transactions?
Are rollover investments in your buyouts and majority recap transactions effected on a tax deferred basis?
22.4%
20.7%
50.0%
If your fund acquires a Participating Preferred Stock (i.e. “double-dip” preferred), do you get your preference/capital returned as a priority upon IPO?
In transactions where your fund holds participating or straight preferred stock, do you have the right to get your preference/capital returned as a priority if dividends or distributions are paid (e.g., in a leveraged dividend recap), or are dividends distributed on a pari passu basis with other equity?
In transactions where there is a rollover of equity by current owners, what are the typical securities purchased by your fund?
Do sellers’ rollover securities rank pari passu with securities purchased by your fund?
Yes, almost always
No, almost always junior to us
Depends on underlying economics of the transaction
52.6%
29.8%
What type of dividend rights do the securities in your fund typically carry?
Accumulating preferential dividend
Dividends only paid when and if a dividend is paid on common stock
Both60.7%
8.9%
If you are entitled to preferential dividends, when are they paid?
Yes
No
70.7%
29.3%
3.4%3.4%
Preferred Stock (or similar LLC interests) entitled to the greater of return of capital (with or without accumulated dividends) or a pro-rata share of the residual equity interest (e.g., “straight preferred”)
Participating Preferred Stock (or similar LLC interests) entitled to both return of capital (with or without accumulated dividends) and a pro-rata share of the residual equity interest
A strip of Redeemable Preferred Stock and Common Stock
Common Stock
21.1%
36.8%
24.6%
17.5%
17.5%
Yes – preference is paid at closing, residual equity held in common
No – all stock converts to common in IPO
65.6%
35.4%
Yes
Sometimes
Never50%
25%
25%
30.4%
Accumulated and paid at time a liquidity event
Currently (whether annual, quarterly, etc.)
93.9%
6.1%
Always
Usually
Sometimes
Rarely
Never
In transactions with an accumulating annual preferred dividend, the average dividend rate reported was8.6%
10
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
rollover SuBjeCT To Call or ForFeITureIn your buyout and majority recap transactions, rollover securities typically are:
TrIgger oF Call or ForFeITure If rollover securities are subject to call/repurchase rights, when are call/repurchase rights typically triggered?
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
teRms of selleRs’ RolloveR secuRItIes
11
puT rIgHTS For rollover SHareSDo rollover securities in your buyout and majority recap transactions have put rights? (i.e., the holder has the right to require the company to buy back her or his rollover securities in specified circumstances):
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
puT prICeWhen put rights exist, what is the typical price paid to acquire rollover securities when the put is exercised?
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
oTHer SHareHolDer rIgHTS For rollover SHareSWhat rights do you typically offer holders of rollover securities? (please check all that apply):
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
% o
f Res
pond
ents
12
Drag-along on rollover SeCurITIeSare rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
TranSFer reSTrICTIonS on rollover SeCurITIeSare rollover securities subject to prohibitions or restrictions on transfer?
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
13
rollover BoarD SeaTSDo rollover security holders typically have the right to a board seat or seats?
If rollover securities are subject to call/repurchase rights, when are call/repur-chase rights typically triggered?
Do rollover securities in your buyout and majority recap transactions have put rights?�(i.e. the holder has the right to require the company to buy back his or her rollover securities in specified circumstances):
Usually
Sometimes
Rarely
Never44.6%46.4%
When put rights exist, what is the typical price paid to acquire rollover securi-ties when the put is exercised?
FMV
Discounted FMV
Cost
4%
24%
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
Always
Usually
Sometimes
Rarely
Never
75%
19.6%
In your buyout and recap transactions, are roll over securities typically:
72%
What rights do you typically offer holders of rollover securities?(please check all that apply):
0%
10%
20%
30%
40%
50%
60%
70%
80%
67.9%
76.8%
14.3%
Preemptive Rights to purchase new issuances of securities
Registration Rights: S-1 “demand” rights
Registration Rights: S-3 rights
Registration Rights: piggyback registration rights
Right of First Refusal/First Offer on sponsor transfers
Right of First Refusal/First Offer on transfers by management or other (non-sponsor) owners
Right of Tag-Along on sponsor transfers
Information Rights
Are rollover securities subject to drag-along/forced sale provisions in favor of the sponsor upon an exit?
1.8%
Owned outright and not subject to call or vesting provisions
Subject to a call at FMV upon specified events such as departure from the company
Subject to a vesting schedule that can result in a forfeiture of unvested rollover interests on specified events such as departure from the company, or subject to both call and vesting requirements, similar to incentive equity interests
58%
38%
4%
42.4%
30.3%
27.3%
5.4%
3.6%
78.6% 76.8%
12.5%14.3%
21.4%
Always
Usually
Rarely
75.0%
23.2%
1.8%
Are rollover securities subject to prohibitions or restrictions on transfer?
25.5%
16.4%
38.2%
10.9%
1.8%1.8%
3.6%
5.5% Always
Usually
Sometimes
Rarely
Never
Depends on the size of the investment
Termination of employment of the holder of the rollover securities for any reason
Termination of employment initiated by the rollover securities holder (i.e., quitting) or termination for cause
Termination of employment of the holder of the rollover securities for “bad leaver” reasons only (e.g., fired for cause) or non-compete violation
opTIonS anD BonuSeSDo you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
reSTrICTIve CovenanTS For rollover InveSTorS
of respondents requirerollover participants to enter into non-competition, non-solicitation and non-hire agreements 96.4%
14
SIze oF pool relaTeD To SIze oF DealDoes the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
DIreCTorS InCluDeD In poolDoes this pool typically cover awards to outside directors?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
Average
11.3%
SIze oF poolWhat is the typical size of the management equity incentive pool in your buyout and majority recap transactions (expressed as a percentage of the fully diluted equity capitalization)?
management equIty IncentIve Pools
If the answer to the preceding question is yes, what is the typical management equity incentive pool size in a transaction involving an aggregate equity contribution of:
$100m or below: 15%
>$100m - $500m: 9.5%
>$500m: 8.9%
II. InCenTIve equITy
15
Fully DIluTeD equITy poolWhat percentage of the company’s fully diluted equity is set aside for each of the following:
negoTIaTIon oF pool SIze How often does management succeed in increasing the size of the management equity incentive pool you initially propose through negotiation?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
STruCTure oF managemenT equITy InCenTIve poolHow is the management equity incentive pool structured in your buyout and majority recap transactions?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
What Percentage of the Company’s Fully-Diluted Equity is Set Aside for Each of the Follow:
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
3.76%
1.1%
CEO
CFO
Other C-Levels
Outside Directors
2.78%
1.85%
16
uSe oF proFITS InTereSTSDo you use profits interests (whether in an operating company or in a holding company on top of a cor-poration) as an equity incentive tool for management?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
proFITS InTereSTS alloCaTIonIf profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
17
anTI-DIluTIon For managemenT poolDo your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?
Does this pool typically cover awards to directors?
Does the size of the management equity incentive pool you offer vary in relation to the size of the transaction/equity investment involved?
How often does management succeed in increasing the size of the equity incentive pool you initially propose through negotiation?
Always
Usually
Sometimes
Never
56.1%
28.1%
If profits interests are used to provide equity incentives for management, how deep within the organization are they awarded?
83.3%
16.7%
Do you allow “rollovers” of interests such as bonus rights or unexercised options, in addition to actual equity interests?
12.3%
How is the management equity incentive pool structured in your buyout and majority recap transactions?
21.8%
34.6%
10.9%
3.5%
Do your management equity incentive pool terms include some type of anti-dilution protection for management other than preemptive rights?�(e.g., the percentage interest of the incentive pool will never be reduced below the initial level):
14.3%
50%
1.8%
Senior management only
All or nearly all plan participants
10.7%23.2% Always
Usually
Sometimes
Rarely
Never
32.7%
Usually
Sometimes
Rarely
Never
62.5%
37.5%
Yes
No
49.1%50.9%
Yes
No
Options
Profits interests
A combination of the foregoing (i.e., profits interest for top management; options or other awards for rank and file)
Restricted stock
Management sale bonus/carve out plan
Other
19.3%
17.5%
35.1%
22.8%
3.5%
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely
Never38.2%
32.7%
10.9%
10.9%7.3%
1.8%
perFormanCe-BaSeD veSTIng CrITerIaIf you use performance-based vesting, which metrics do you tie to vesting?
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
18
Average
4.6 years
TIme-BaSeD veSTIngWhat is the typical period for time-based vesting?
Buy BaCk on veSTeD equITyDoes the issuer have the right to call buy back veSTeD management equity incentive awards?
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
TrIgger oF veSTeD equITy Buy BaCkIf the issuer has the right to repurchase veSTeD equity incentive awards (i.e., call rights), when does this right arise?
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
oPtIons foR IncentIve equIty
19
BuyBaCk prICe For veSTeD equITyWhen you have a buyback, what is the typical price paid to acquire veSTeD management equity incentive interests?
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
DeTermInaTIon oF Fmv For BuyBaCkWhen incentive equity is repurchased at Fmv, is Fmv typically determined by:
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
aCCeleraTIon oF veSTIng on SaleDoes time-based vesting of management equity incentive pool interests accelerate on a sale of the company?
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
20
TermS oF aCCeleraTIonWhen time-based vesting accelerates on a sale of the company, do you typically provide:
Does the issuer have the right to call claw back VESTED management equity incentive awards?
If the issuer has the right to repurchase VESTED equity incentive awards (i.e., call rights), when does this right arise?
What is the typical price paid to acquire VESTED management equity incentive interests?
FMV in all cases
FMV in “good leaver” situations; forfeiture price in “bad leaver” situations
78%
Does time-based vesting of time-based management equity incentive pool interests accelerate on a sale of the company?
If your answer to the previous question was "Performance-based", please choose all that apply:
22%
When incentive equity is repurchased at FMV, is FMV typically determined by:
0
10
20
30
40
50
60
70
80
69.6%
30.4%
23.9%
When time-based vesting accelerates on a sale of the company, do you typically provide:
69.6%5.4%
8.9%
16.1%Full acceleration (subject to attainment of hurdles for performance-based equity)
Partial acceleration
“Double trigger” acceleration (i.e., no acceleration at closing but acceleration occurs later if the new owner terminates the award holder)
Varies depending on circumstances
21.7%
Return on sponsor’s invested capital
IRR
EBITDA
A combination of the foregoing
Do you use profits interests in an LLC (whether an operating company or a holding company on top of a corporation) as an equity incentive tool for management?
Always
Usually
Sometimes
Rarely28.6%
62.5%
7.1%
1.8%
Always
Usually
Sometimes
Rarely
Never
25.5%
41.8%
14.5%
12.7%5.5%
34%
26.4%
32.1%
Termination of employee for any reason
Voluntary termination (i.e., quitting) or “bad leaver” termination (i.e., cause, non-compete violation)
Bad leaver termination only
Rarely or never have call rights on vested incentive equity
7.5%
24.5%
The board in its discretion
Reference to an independent valuation (e.g., most recent 409A valuation)
Other
69.8%
5.7%
Always
Usually
Sometimes
Rarely
Never
42.9%
14.3%
35.7%
1.8%
5.4%
25%
50%
For those respondents indicating partial acceleration of vesting, the % of shares accelerating was:
50%
25%
aCCeleraTIon on IpoDo you typically provide for acceleration of vesting on some or all of time-based management equity incentive awards on an Ipo?
Do you typically provide for accelerated vesting for some or all of unvested time-based manage-ment equity incentive awards on involuntary termination of the award holder’s employment?
Do you typically provide for acceleration of vesting of all or a portion of performance based incentive equity awards on a liquidity event or termination event?
Are equity incentive awards in your buyout and majority recap transactions typically subordinated to an accumulating preference dividend paid to equity investors?
Do you typically provide for acceleration of vesting on some or a portion of time-based manage-ment equity incentive awards on an IPO? When incentive equity is repurchased at FMV, is FMV typically determined by:
Always
Usually
Sometimes
Rarely
38.9%
35.2%20.4%
5.6%
Always
Usually
Sometimes
Rarely
Never
34.0%
22.0% 28.0%
8.0%8.0%
Always
Usually
Sometimes
Rarely
Never, no vesting unless performance targets are met
30%
22%
32%
6%
Always
Usually
Sometimes
Rarely
Never
35.7%
14.3%35.7%
5.4%
8.9%
10%
Always
Usually
Sometimes
Rarely
Never
Never heard of that
6%
10%
16%
6%
60%
2%
Do you typically require rollover securities holders to enter into the following?�
Non-competition agreements
Non-solicitation non-hire agreements
Both
96.4%
28.6%
28.6%
21
aCCeleraTIon on TermInaTIonDo you typically provide for accelerated vesting for some or all of unvested time-based management equity incentive awards on involuntary termination of the award holder’s employment?Do you typically provide for accelerated vesting for some or all of unvested time-based manage-
ment equity incentive awards on involuntary termination of the award holder’s employment?
Do you typically provide for acceleration of vesting of all or a portion of performance based incentive equity awards on a liquidity event or termination event?
Are equity incentive awards in your buyout and majority recap transactions typically subordinated to an accumulating preference dividend paid to equity investors?
Do you typically provide for acceleration of vesting on some or a portion of time-based manage-ment equity incentive awards on an IPO? When incentive equity is repurchased at FMV, is FMV typically determined by:
Always
Usually
Sometimes
Rarely
38.9%
35.2%20.4%
5.6%
Always
Usually
Sometimes
Rarely
Never
34.0%
22.0% 28.0%
8.0%8.0%
Always
Usually
Sometimes
Rarely
Never, no vesting unless performance targets are met
30%
22%
32%
6%
Always
Usually
Sometimes
Rarely
Never
35.7%
14.3%35.7%
5.4%
8.9%
10%
Always
Usually
Sometimes
Rarely
Never
Never heard of that
6%
10%
16%
6%
60%
2%
Do you typically require rollover securities holders to enter into the following?�
Non-competition agreements
Non-solicitation non-hire agreements
Both
96.4%
28.6%
28.6%
SuBorDInaTIon To preFerreD DIvIDenDare management equity incentive awards in your buyout and majority recap transactions typically sub-ordinated to an accumulating preference dividend paid to equity investors?
Do you typically provide for accelerated vesting for some or all of unvested time-based manage-ment equity incentive awards on involuntary termination of the award holder’s employment?
Do you typically provide for acceleration of vesting of all or a portion of performance based incentive equity awards on a liquidity event or termination event?
Are equity incentive awards in your buyout and majority recap transactions typically subordinated to an accumulating preference dividend paid to equity investors?
Do you typically provide for acceleration of vesting on some or a portion of time-based manage-ment equity incentive awards on an IPO? When incentive equity is repurchased at FMV, is FMV typically determined by:
Always
Usually
Sometimes
Rarely
38.9%
35.2%20.4%
5.6%
Always
Usually
Sometimes
Rarely
Never
34.0%
22.0% 28.0%
8.0%8.0%
Always
Usually
Sometimes
Rarely
Never, no vesting unless performance targets are met
30%
22%
32%
6%
Always
Usually
Sometimes
Rarely
Never
35.7%
14.3%35.7%
5.4%
8.9%
10%
Always
Usually
Sometimes
Rarely
Never
Never heard of that
6%
10%
16%
6%
60%
2%
Do you typically require rollover securities holders to enter into the following?�
Non-competition agreements
Non-solicitation non-hire agreements
Both
96.4%
28.6%
28.6%
22
ConverSIon oF proFITS InTereSTSIn management equity incentive pools that utilize profits interests, do you require “conversion” of the profits interest into capital interests on termination of employment?
Do you typically provide for accelerated vesting for some or all of unvested time-based manage-ment equity incentive awards on involuntary termination of the award holder’s employment?
Do you typically provide for acceleration of vesting of all or a portion of performance based incentive equity awards on a liquidity event or termination event?
Are equity incentive awards in your buyout and majority recap transactions typically subordinated to an accumulating preference dividend paid to equity investors?
Do you typically provide for acceleration of vesting on some or a portion of time-based manage-ment equity incentive awards on an IPO? When incentive equity is repurchased at FMV, is FMV typically determined by:
Always
Usually
Sometimes
Rarely
38.9%
35.2%20.4%
5.6%
Always
Usually
Sometimes
Rarely
Never
34.0%
22.0% 28.0%
8.0%8.0%
Always
Usually
Sometimes
Rarely
Never, no vesting unless performance targets are met
30%
22%
32%
6%
Always
Usually
Sometimes
Rarely
Never
35.7%
14.3%35.7%
5.4%
8.9%
10%
Always
Usually
Sometimes
Rarely
Never
Never heard of that
6%
10%
16%
6%
60%
2%
Do you typically require rollover securities holders to enter into the following?�
Non-competition agreements
Non-solicitation non-hire agreements
Both
96.4%
28.6%
28.6%
23
about the private equity practiceWe are a nationally recognized private equity and growth equity practice and market leader in the middle market segment. We use our market knowledge and industry relationships to help clients win deals and build equity value. We have exten-sive experience and a long list of clients in a number of key industries including technology, life sciences, Fintech, financial services, consumer products, healthcare, and education. With a team of over 100 attorneys, we represent early and late stage companies across the globe and cover the full life cycle of their investments – from venture capital to leveraged and distressed buyouts.
For more information about our private equity practice, please visit us at http://www.goodwinprocter.com/Private-Equity or contact co-founder and co-chair John LeClaire at [email protected] or Jon Herzog at [email protected].
about goodwin procterGoodwin Procter LLP is a leading Am Law 50 and Global 50 law firm, with offices across the United States and in Europe and Asia. Excelling at complex transactional work and high-stakes litigation, the firm combines in-depth legal knowledge with practical business experience to help clients maximize opportunities and manage risk. With more than 850 lawyers, Goodwin offers innovative counsel and delivers results through a client-centric and collaborative approach. The firm focuses on matters involving financial institutions, intellectual property, private equity, real estate capital markets, securities litigation/white collar defense, and technology/life sciences. Information may be found at www.goodwinprocter.com. Follow us on Twitter @goodwinprocter
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© 2015 Goodwin Procter LLP. All rights reserved. This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP, Goodwin Procter (UK) LLP or their attorneys. Prior results do not guarantee similar outcome.
Goodwin Procter LLP is a limited liability partnership which operates in the United States and has a principal law office located at 53 State Street, Boston, MA 02109. Goodwin Procter (UK) LLP is a separate limited liability partnership registered in England and Wales with registered number OC362294. Its registered office is at Tower 42, 25 Old Broad Street, London EC2N 1HQ. A list of the names of the members of Goodwin Procter (UK) LLP is available for inspection at the registered office. Goodwin Procter (UK) LLP is authorized and regulated by the Solicitors Regulation Authority.