Most independent sponsor deals include a management incentive plan (MIP) that gives the operating team meaningful upside in the next exit.
Size of the pool
Typical MIP pools represent 8 to 15 percent of fully diluted equity, often issued as profits interests with a hurdle price equal to the sponsor's entry valuation.
Vesting
Time-based vesting over four to five years is standard, often with acceleration on a change of control.
Who gets allocated
The CEO usually receives the largest single grant, followed by other C-suite executives. Strong sponsors will also allocate a portion to high performers below the C-suite.
Negotiation points
Push for clarity on dilution if future capital is raised, on the treatment of MIP at exit, and on what happens if you leave for good reason versus cause.
If you are evaluating a transaction in this space and want a candid second look, Solender Capital is happy to compare notes. Reach out through our contact page and share what you are working on.