equity, stock-optionsMy company has gone from a public company to private. The private equity company has given two options to management staff:
Get a previous year’s bonus but sign a 12 month legal retainer
Accept an incentive RSU package in the new private company but no surety of payout date or exact amount but simply saying that if there is a payout it will be a multiple of the bonus (opton #1) if new private entity gets bought out or goes public again.
How can I calculate risk versus reward in the above situation? What are the pros and cons of each option?
We had a similar situation when Seagate was taken private by Silver Lake Partners (a private equity giant) some years ago. Many of the folks chose option #1 especially if they were close to retirement or were unsure of how they were perceived by management. In hindsight it seemed like a good move given the huge layoffs that happened. Companies go private for a reason - so that the new owners can go about “streamlining” operations without pesky shareholders bothering them. Coming back to my example, for the top performers staying back and choosing option #2 proved to be a bonanza because when Seagate went public again they were rewarded handsomely.
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