Case Study: Enterprise Management Incentive
This high-end construction and design company is owned in roughly equal proportions by its founder directors. The directors wished to consider an exit route well in advance of retirement, with the ultimate aim to hand control over gradually to the next layer of management, but with additional share ownership available to other employees in the business.
The establishment of an Employee Management Incentive (EMI) option plan enables employees to exercise options over a period of time; slowly acquiring an interest in the company while the existing directors’ interest was diluted.
The EMI does not provide a complete exit but starts the ball rolling and demonstrates the commitment of the founders to the next generation of managers, particularly as additional options are granted on an annual basis. Furthermore, the plan provides enough flexibility so that, should a third party make an offer to buy the company, option holders will be able to share in the proceeds alongside the founders.
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