We are entering the active preparation phase of our exit runway and want to secure our key leadership team with stay bonuses without prematurely leaking the news of a potential sale. How do we structure these incentives so our leaders stay motivated and aligned?

Question

Tyler Smith · Accepted Answer

Keeping your key leadership team aligned and focused during an exit runway is critical because buyers will walk away if they sense key-person flight risk. However, telling them too early about a transaction can cause unnecessary anxiety and distraction. The key is to structure long-term incentive plans, or stay bonuses, that reward them for hitting operational milestones rather than just the transaction itself.

Avoid framing these bonuses solely around a sale. Instead, tie the incentives to clear operational Rocks and V/TO goals over the next twenty-four to thirty-six months. Frame the program as a performance and retention plan designed to reward them for scaling the company to its next level of maturity.

You can structure a phantom equity plan or a cash-based stay bonus that pays out in tranches. For example, design the plan to pay one tranche when specific EBITDA targets are met, a second tranche at the closing of any successful transition, and a final tranche after a defined transition period post-sale. This keeps your leaders focused on operational execution today while aligning their long-term interests with a clean exit.

By focusing the conversation on building an independent, high-performing organization, you protect confidentiality. Your leaders will be highly incentivized to document processes, build their successors, and hit their Scorecard targets, which is exactly what a buyer wants to see.