How to incentivise shareholders to help further operationnally ?

by a searcher from INSEAD

2 years ago

Hi,

I am closing on a deal (but still got a 100k equity opening if you are interested, great IRR!)  and through discussions with my investors, I'd like to find more ways to incentivise them to help operationnaly post-acquisition (they also have signaled they'd like the same).
The deal for investors is a bit of equity and some convertible-debt (with a non-conversion premium), and they are already getting a great IRR return, so don't want to allow any conversion of the convertible debt, and don't want to add any ratchet on top.

It's not a big target (~1m EBITDA), so giving them a salary doesn't feel super approriate, and also not exactly what I am after.

What mechanisms have you seen that would still incentivise them to help and get involved for the operations of the business (e.g; regular catch-up, advice, on-site visits...) ?

Thanks a lot in advance,
Clément Hurpin

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searcher from London Business School

My suggestion would be to appoint the investor(s) as a special advisor and compensate for an estimated time per month (to be used at your discretion) at an agreed rate? Example could be to pay a day rate for 1 day a month, roughly equal to 8 hours and you make use of the 8 hours as you please (phone call, meetings). I would make a formal agreement that is time bound (e.g. for 6 months to a year) and specify in the agreement what you want out of it.

2 years ago | like reply | 0 likes

searcher

Thanks for the post. Would be interesting to hear advice from previous experiences too

2 years ago | like reply | 0 likes

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