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We are considering selling our privately owned company. The CFO has no equity, so how should we compensate him for this private sale?


Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

You can provide a "shadow" equity position and pay him from the proceeds of the sale as though it is owned equity, effectively providing a "participation" in the proceeds. Structure any such agreement after "testing" for various possible sale price outcomes, and put it in writing. Provide that gross proceeds will be divided among all equity participants, including "shadow equity" owners.

Robert Jevens
Title: Director - Business Markets and M&A Prac..
Company: The Bensman Group
(Director - Business Markets and M&A Practice, The Bensman Group) |

Also consider Transaction Risk insurance to backstop indemnity demands, replace escrow and take more proceeds off the table for distribution to shareholders and others.


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