medium · Private Equity advanced-lbo
In a 'Management Equity Program' (MEP), 'Sweet Equity' is typically defined as:
- Equity that management receives for free without having to invest any personal capital.
- A guaranteed annual bonus paid to the CEO regardless of the company's financial performance.
- Common equity that management is allowed to purchase at the same price as the sponsor but which represents a higher percentage of the total equity than their cash investment.
- Preferred shares that pay a fixed dividend to management before the sponsor receives any proceeds.
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