We expect the buyer will require key members of our leadership team to sign non-compete and retention agreements, but we are worried this will trigger resentment or demands for immediate equity. How do we structure incentive plans on our runway to align our team with the exit without giving away equity?

Question

Tyler Smith · Accepted Answer

Trying to lock down your key employees at the closing table is a recipe for disaster. If your leadership team feels blindsided by a transaction or forced into signing restrictive agreements under pressure, they may walk away, which can instantly derail your deal. You must align their financial interests with your exit goals early in your runway. Instead of giving away actual equity, which complicates your cap table and gives minority shareholders voting rights, introduce a structured stay-bonus or phantom stock plan. A stay-bonus plan is an operational tool designed to reward key personnel for remaining with the company through the transaction and for a specified transition period, often six to twelve months post-closing. Define these plans on your runway using clear, objective performance metrics tied to your V/TO®. Make it known that a successful transition is a shared win. The payout should be meaningful enough to incentivize cooperation but structured so that a portion of the bonus is paid at closing, and the remainder is distributed after they successfully hit their transition milestones. This setup satisfies the buyer by guaranteeing leadership continuity, and it rewards your team for their loyalty without diluting your ownership. When your leadership team is financially incentivized to support the sale, they will actively help you present the business in the best possible light during due diligence.