skin-in-the-game-hiringFAQs

How much does a typical hired candidate for one of your searches invest & when?
Amounts ranging from-$30,000.-$200,000 have been invested by our hired candidates over the past 10 years. Newly hired CEOs are generally offered larger investment opportunities followed by newly hired CFOs. The mutually pre-agreed upon amount is invested  within a week or so after the employment start date.  Investment amounts have ranged  between $60,000 & 100,000. At times the client will allow a greater invested amount if the hired candidate asks for the opportunity to do so.

What percentage of company stock does a newly hired candidate receive in exchange for his investment?
This varies based on the size of the employer & EBITDA growth from time the private equity ownership acquired the business but the newly hired executive’s equity purchase  is usually 2-4% of the company’s stock. In addition stock option plans can be worth another 2-3% of the company’s stock. This option amount can be worth up to 6% for the CEO.

When does the stock purchase become vested?
Usually within 5 years or upon the sale of the company.

Will the employer work out any portion of the new hire’s stock purchase price against her/his future bonus earnings?
Where larger new hire stock investment sums are concerned, the private equity firm  owners might offer such an arrangement but it is the exception rather than the rule. A mutually agreed upon investment amount is almost always required shortly after the new hire begins employment with the balance paid under a special arrangement terms & conditions.

What is the typical $$$ value of a company share to a new hire at the time of her/his equity investment?
Often the per share price offered to the new hire at the time of her/his equity investment is the same as that paid by the owners at the time the company was acquired. This is known as the “strike price”. Otherwise the current per share value is calculated.

In addition to the typical new hire stock purchase plan, are there any stock option plans offered?
There are always stock option plans based on the experiences we’ve had with our private equity clients. In most case the stock options are automatically vested over a 5 year vesting period. In other cases the stock options are awarded annually based on certain company earnings targets being reached;otherwise they are not awarded for that year.

Why do the private equity owners prefer hiring senior managers who put "skin in the game" to grow their portfolio companies?
The philosophy behind these equity purchase plans is straightforward. The Board wants the senior members of management to be their partners, motivated by the same things they are, without any inherent conflicts. In particular, the investors expect the senior management of the Company to have capital at risk in order to provide both an alignment of current interests and a large incentive for success if the business meets its growth expectations.

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