management-incentive-planlisted

# Management Incentive Plan Agent ## When to use Use this when a buyout is nearing signing and the post-close equity for management has to be sized, split, and papered. Typical triggers: an IC asking what the pool costs in returns, a CEO negotiating sweet equity, or refreshing a pool after a departure. Reach for it when the question is what management gets and what that does to the sponsor's return. ## What it does It produces a management incentive plan: pool size against fully diluted equity, allocation by role, the split between time and performance vesting, a ratchet with a defined hurdle, leaver mechanics, and a dilution bridge showing sponsor returns gross and net of it. ## Method 1. Size the pool. Anchor it to the deal, not a rule of thumb. - Ten to fifteen percent of fully diluted equity is the mid-market norm, eight to twelve on larger deals; hold fifteen to twenty percent unallocated or the first new hire forces a dilutive top-up. 2. Allocate by role. Concentrate it. - CEO a third to a half of the pool, CFO about half the CEO's, the rest across the team. Spread thin, it buys goodwill and changes no behaviour. 3. Price the entry. Require real cash. - Management subscribes at a defensible fair value with its own money — sweet equity — so the position can lose, not merely fail to pay. - Check the envy ratio, sponsor cost per point of equity over management's: two to four times is normal, above that it is a giveaway. 4. Vest against time and against ou