Just received an offer from a private midsize company who was just bought/invested in by a PE with undisclosed terms. They are offering equity as part of the comp package. What do I need to know to evaluate that portion of the offer.

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You should consider the following, minimally.

- The PE hold period will vary based on market conditions and industry. It could be anywhere between 2-10 years.l…”average” is 5. That’s how long that portion of your compensation will be illiquid.
- Understand the basis of value used to calculate the equity. %rev, EBITDA, etc. so that when the next transaction occurs you know what value increase to reasonably expect.
- Have clarity on what happens to that equity when/if you leave the firm. An ideal scenario is that they allow you to retain the equity, but it’s more likely that they will have a buy back clause at the most recent valuation (leaving you with no gain).

My preferred negotiation order is salary, calculated commission, bonus target, and then private equity so you drive the highest certainty around comp that you can.

Source: I have equity in a PE portfolio company.

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This is super helpful - thank you!

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