Management Incentive Plan (MIP)
Private Equity glossary · Private Equity Fundamentals
Definition
Equity (options, profits interests) awarded to portfolio-company management.
Management Incentive Plan (MIP) in plain English
A Management Incentive Plan (MIP) is the pool of ownership a private equity firm sets aside for the executives running a company it bought, so those leaders get rich only if they make the company more valuable. Instead of just a salary, managers receive things like stock options or 'profits interests' — a slice of the upside that pays off when the business is eventually sold for more than the owners paid. It works like promising the staff of a fixer-upper store, 'grow this and we'll cut you in on the sale price' — suddenly everyone's grinding to boost the number. The whole point is glue: tie the bosses' personal payday to the investors' payday so they're all rowing the same direction.
Also called: MIP
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