Other Advisory Services

Equity Transfer Mechanisms

• The firm’s focus at this time is on growth, continued independence and attracting, retaining and rewarding talented professionals over the long term. Participation in the firm’s growing capital value – i.e. in its equity – is a key component of an alignment of interests between founding principals and the “next generation”. Establishing effective internal equity transfer mechanisms requires that they reflect:
  • The long term goals and values of the organization, e.g. permanent independence or an ultimate sale, even if that event is many years down the road.
  • The degree to which equity transfers or grants have already taken place – at or below fair market values or as grants.
  • The values at which current principals will sell equity.
  • Financing of equity purchases – company/third-party loans; other forms of external financing; “cashless” options; a mix . . .
  • Other conditions such as put/call rights upon termination, "haircuts" for bad leaver, and priority waterfalls to purchasers and sellers.
  • The valuations or valuation formulas to be used to price the equity or set an option strike price, including the application of minority and lack-of-marketability discounts.
  • An efficient tax structure.

We have helped many firms through an equity transfer process, drawing on our broad transactional experience, and bringing into the dialogue an objective view – based on market realities and competitive practices – of the appropriateness and effectiveness of a given equity transfer plan.