We know that a buyer will require our key leadership team to stay on post transaction, but we do not want to grant equity this late in the game. How do we structure a performance based stay bonus on our exit runway that aligns our team with a successful transition?

Question

Tyler Smith · Accepted Answer

Securing your key leadership team through the transaction process is vital, but diluting your equity with last-minute stock grants can be expensive and complex. A highly effective alternative is to design a structured, performance-based transaction or stay bonus program during your exit runway. This program should reward key leaders for hitting specific operational metrics and remaining with the company for a set period, such as twelve to twenty-four months post-transaction. Tie these bonuses to the successful completion of the sale and the achievement of transition milestones. Ensure the program is documented clearly, showing that the payouts are funded out of the transaction proceeds or structured as part of the buyer's working capital target. This aligns your leadership team with the goal of maximizing company value, as they know their financial reward is tied directly to a successful, clean exit. By presenting this pre-packaged incentive program to a buyer, you demonstrate that your team is fully committed to the transition, reducing the buyer's post-close operational risk and helping you command a premium valuation.