Sponsors are likely to explore share-based schemes and other plans to incentivise non-managerial staff.

By Kendall Burnett, Tom D. Evans, Sarah Gadd, David J. Walker, Erin McKirdy, and Catherine Campbell

Incentivising management with sweet equity and co-investment opportunities is a tried and tested strategy for buyout firms, which helps to align key management interests with those of the PE sponsor. However, PE sponsors in the US have recently been credited for extending share ownership opportunities beyond key management (and in some cases to all employees), using innovative employee incentive schemes.

Recent press coverage of impressive US payouts for “shop floor” employees and favourable firm returns underlines the positive results and publicity that can be achieved from a well-structured incentive plan. Amid the ongoing cost-of-living crisis, the “great resignation”, and increased investor focus on ESG credentials, more sponsors will likely explore share-based incentive schemes as a way to reward and retain non-managerial portfolio company staff.