I am interested in acquiring a small, niche company. The key employee is threatening to leave if the seller does not give him xxx amount to compensate for his years of loyalty. I want to buy this company but am looking for someone with similar technical background as the lead employee and offering him equity in the company. I am not ready for cap table but would like to learn more about phantom equity How does phantom equity work? Any best practices? Thank you!
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In an effort to avoid dilution to the existing owners, we're deciding to offer i) x% above our entry valuation at an exit and ii) x% of any distributions.
Must be present at liquidity event to receive anything