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Management Incentive Equity in Private M&A: Equity Arrangements, Vesting, Transferability, Tax Considerations

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Wednesday, June 5, 2024

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This CLE webinar will discuss the issues relating to the compensation of target management teams in the context of private equity M&A transactions. The panel will address structuring equity-based incentive plans, restrictions on incentives, vesting and forfeiture based on employment status, distributions, repurchase rights, monetization events, and general tax considerations.


Management teams play a critically important role for the target in M&A transactions and buyers (especially financial buyers) often view management team continuity after closing as a key component of the deal. The terms and structure of incentive compensation plans vary depending on the structure of the target and the buyer's prior practices and are often driven by tax considerations.

Some common incentive equity structures include profit interests, options, phantom equity, and restricted stock grants. These various arrangements have different tax treatment and different treatment for purposes of receiving dividends and distributions. In addition, incentive equity grants are often subject to vesting and performance thresholds and to repurchase rights on termination of employment.

When structuring incentive plans M&A and management counsel must be aware of the key issues involved with each type of compensation structure including the type of equity or other compensation, vesting and forfeiture conditions, the timing and amount of distributions, monetization events, repurchase rights, and tax considerations.

Listen as our authoritative panel outlines common ways for structuring management incentive plans and provides practice tips for negotiating the terms of these agreements.



  1. Overview of management incentive compensation plans
  2. Equity-based incentive plans
    1. Rollover equity
    2. Incentive equity
  3. Cash bonuses and other alternatives
  4. Vesting and forfeiture based on holder's employment status
  5. Distributions: timing and amounts
  6. Repurchase rights
  7. Monetization events
  8. General tax considerations
  9. Key takeaways


The panel will discuss these and other relevant issues:

  • What are the key factors for determining what employees in the target company will be entitled to incentive compensation?
  • What are the different types of equity compensation and what are the advantages of each?
  • What are some of the common limitations on distributions of incentive equity?
  • When is time vs. performance an appropriate benchmark for vesting of incentives?
  • What are the general tax considerations with regard to management incentive plans?


Lilling, Austin
Austin S. Lilling

Morgan, Lewis & Bockius

Mr. Lilling focuses his practice on issues relating to executive compensation arrangements and employee benefit...  |  Read More

McLean, Sarah
Sarah McLean

Willkie Farr & Gallagher

Ms. McLean is a leading private equity lawyer with over 20 years of experience advising private equity funds and...  |  Read More

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