medium · Private Equity & LBOs

In a 'Management Equity Program' (MEP), 'Sweet Equity' is typically defined as:

1. Equity that management receives for free without having to invest any personal capital.
2. A guaranteed annual bonus paid to the CEO regardless of the company's financial performance.
3. 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.
4. Preferred shares that pay a fixed dividend to management before the sponsor receives any proceeds.

Sign up free to see the explanation and track your rank →