- Candidates who focus on the total compensation package rather than individual elements tend to achieve superior outcomes.
- Executives who understand how salary, bonus, equity, and co-investment interact are better equipped to evaluate the true value of an offer.
- Transparency between the executive and recruiter creates vital alignment on expectations and priorities.
- Deal performance, internal dynamics, and sponsor philosophy all influence which elements of compensation are flexible.
Compensation negotiations are the final hurdle before your next PE-backed role begins. This process requires executives to thread the delicate balance between seeking a competitive offer and aligning with their prospective sponsor.
Private equity professionals expect candidates to negotiate within the spirit of the deal. In fact, neglecting to negotiate often indicates a lack of PE-readiness. If a C-suite candidate cannot effectively negotiate their own compensation, sponsors may question their ability to deliver a compelling exit.
Candidates who do not conduct extensive diligence tend to be ineffectual negotiators. Before receiving an initial offer, discerning executives will have previously researched the competitive landscape, the sponsor’s priorities, and the depth of challenge and risk associated with the opportunity.
What makes for an ideal compensation package varies based on personal, professional and economic factors. While equity is typically the top priority in any PE-backed role, shifts in market conditions or industry trends can influence the emphasis on base salary or bonus.
A private equity executive compensation package typically includes four key elements: salary, annual performance bonus, equity, and co-investment. Below are several best practices for negotiating these key elements that consistently lead to strong outcomes for all stakeholders.
Salary Considerations
Sponsors often aim to limit fixed costs in their efforts to maximize EBITDA. This creates a natural tens...