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Anonymous VP Finance

We are considering selling our privately owned company. The CFO has no equity, so how should we compensate him for this private sale?

Asked on May 9, 2013

Answers

Barrett Peterson Senior Manager, Actg Stnds & Analysis • February 29, 2012

You can provide a "shadow" equity position and pay him from the proceeds of the sale as though it is owned equity, effectively providing a "participation" in the proceeds. Structure any such agreement after "testing" for various possible sale price outcomes, and put it in writing. Provide that gross proceeds will be divided among all equity participants, including "shadow equity" owners.

Robert Jevens Director - Business Markets and M&A Practice • March 4, 2012

Also consider Transaction Risk insurance to backstop indemnity demands, replace escrow and take more proceeds off the table for distribution to shareholders and others.

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