Equity Incentive Plan (EIP)

After a PE acquisition, the buyer typically promises a percentage of post-close equity to key employees as a retention and alignment tool. The concept makes sense: stay through the hold period, hit the targets, share in the upside. The execution is where founders and employees get hurt. In the Crossfield deal, Ridgeline promised 10% to the management team but provided no modeling showing dollar payouts under different exit scenarios, no transparency on whether the shares sat behind liquidation preferences, no documentation, and no timeline for plan delivery. Three senior employees made career decisions based on a percentage without a denominator. Eighteen months post-close, no plan documents had been distributed. The detail that most often turns a generous-sounding MIP into a disappointment is its position in the payout waterfall. A "10% management pool" means little until you know what sits ahead of it — the PE firm's liquidation preference, participating-preferred returns, and the rest of the preference stack get paid first, so management's slice is a percentage of whatever is left, not of the headline exit value. Add-on acquisitions can dilute the pool further along the way. The only way to know what the percentage is actually worth is to demand full pro-forma modeling: dollar payouts to the pool across a range of exit values, with the complete preference stack and expected dilution built in. A percentage without that denominator is a number you can't bank.