PE Compensation Series with Davis Polk, Part 3: Management Rollovers and Incentive Equity Structures for Portfolio Companies

PE Compensation Series with Davis Polk, Part 3: Management Rollovers and Incentive Equity Structures for Portfolio Companies

Learn from Davis Polk’s Executive Compensation partners Adam Kaminsky and Veronica Wissel, along with Carta’s Chief People Officer Nick Avery, in this third installment of our PE compensation series. This recording is a deep dive into the technical and market-driven mechanics of management equity arrangements within private-equity-backed deals.

A well-structured management equity incentive plan is a critical component of any PE transaction, ensuring alignment of the sponsor and the management team from the outset.

The panel goes beyond high-level trends to analyze the specific levers that shape today’s market. Topics include:

• Management rollover mechanics: Differentiating "true" equity rollovers from reinvestment of proceeds, noting tax implications for C-Corps vs. Partnerships.
• Market standards for rollovers: Analysis of typical rollover sizes and when pari passu treatment with the sponsor is, or is not, standard.
• Incentive pool economics: How pool sizes (typically 8–15%) are set, with a growing preference for tax-efficient profits interests over stock options.
• Vesting, call rights, and leaver scenarios: Addressing consequences of departure, including "Bad Leaver" call rights and the use of "cap and hold" alternatives.
• Restrictive covenants and employment terms: Aligning non-compete/non-solicit periods with equity forfeiture and severance triggers.

Davis Polk is an elite global law firm with world-class practices across the board. Their more than 1,000 lawyers around the globe provide seamless, best-in-class service on their clients’ most significant matters.

Featuring

• Adam Kaminsky
  Partner, Executive Compensation
  Davis Polk

• Veronica Wissel
  Partner, Executive Compensation
  Davis Polk

• Nick Avery
  Chief People Officer
  Carta

• Flora Tsui
  Private Equity BD & Partnerships
  Carta

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