People
Enhancing and protecting value: Incentivising your key people and aligning interests
Empowering your people
For most businesses, their people are the most important asset. Identifying members of your team who are key to your growth and exit plans, and incentivising those people, is essential to achieving the best terms from a sale. Effective incentive schemes help to drive growth and facilitate succession planning, which ensures you have flexibility over the type of deal and role you will play post-completion. However, it’s worth remembering that not everyone is motivated in the same way and not all incentive plans are universally available. We look at the benefits that incentive schemes bring to companies considering a sale and the tools available to reward and motivate your team.
A sale is an opportunity to reward the people who have helped you build the business. Without the support of your key people, you may even struggle to get through the process and almost certainly won’t be able to achieve the best results.
SIMON ADAMS
Employer Solutions Partner
Aligning your objectives
Incentive schemes are an effective way to encourage the right behaviours in your business, for the short, medium and long-term. Knowing what you want to achieve in your business plan enables you to incorporate those goals into your management incentive scheme, which aligns their success with yours. Communicating clear objectives and a transparent mechanism to recognise and reward your team ensures they are empowered and ‘on the journey’ with you, which ultimately drives the performance of your business.
Attracting and retaining the best talent
Incentive schemes provide a powerful currency to attract and retain the people who will help you deliver your strategic plan and add the most value to your business. The opportunity to share in the ownership structure is an exciting one and can provide a competitive advantage in keeping hold of sought after skills within your market. Ensuring that you can present an experienced and capable team when the time comes to sell not only adds to value but provides an important succession story, which reduces reliance on you and supports a deal structure with more cash at completion.
Knowing what behaviours and results you want to encourage is key to finding the right management incentive plan.
Remember, it’s personal
What motivates one person won’t necessarily motivate another so it’s important to consider management’s individual aspirations. The equity in your business is precious. Whether someone is strategically important to the future or is someone you want to thank for past performance, impacts the way you should reward them. Distributing equity to people who won’t value it, or spreading it so thinly that it stops being a motivator, risks wasting the opportunity. However, you should avoid introducing a complicated set of incentives that creates complexity as this may become a barrier to a deal.
Know your options
There are many ways to empower your team – Enterprise Management Incentive (EMI) options, Company Share Option Plans (CSOP), Growth Shares, Long Term Incentive Plans (LTIPs) and bonuses are just a few of the tools you may be able to use. Some schemes also carry attractive tax advantages which can significantly add to the value individuals, companies or shareholders receive. However, the size of your business, its ownership structure and location can limit the incentives open to you. In addition, the ability to specify performance criteria or allow discretion over the awards varies depending on the mechanism. Knowing what’s important helps to identify the right plan.
Demand for talent can be fierce. Incentive plans give you a currency to find and keep the best talent.
How we can help
When implemented correctly, management incentive plans are a powerful tool to attract and retain key people, reward them and align their objectives with yours. Often tax reliefs bring extra benefits that add to the value of the deal. However, to have the most impact these need to be considered and implemented early.
Our employer solutions team has extensive experience of working with businesses across all sizes and jurisdictions, helping them to incorporate the best incentive scheme for their organisation, team and exit aspirations.
