We have implemented a phantom stock plan to retain our key employees, and the buyer wants us to terminate the plan and pay out the balances from our transaction proceeds. How do we structure the deal so the buyer shares the cost of retaining these key team members post-close?

Question

Tyler Smith · Accepted Answer

When a buyer insists on terminating your phantom stock plan at close, they are trying to shift the entire cost of employee retention onto your side of the ledger. They want a clean slate, but they also want the key employees to remain motivated to transition the business successfully. To resolve this, you must demonstrate to the buyer that retaining these key employees directly protects the enterprise value they are purchasing. You can structure this by proposing a shared retention pool. A portion of the phantom stock payout can be rolled into a post-closing stay bonus, funded partially by the buyer as part of their working capital or transition budget. To justify this to the buyer, use your EOS Accountability Chart. Show them the critical seats these employees occupy and how their GWC™ evaluations prove they are indispensable to daily operations. Present the documented processes they own, showing that their retention guarantees the stability of your cash flows. By aligning the phantom stock transition with the post-close operating plan, you prove that keeping these key players on board reduces transition risk. This operational evidence allows you to negotiate a structure where the buyer shares the financial responsibility for retaining your top talent.