Deal by Deal: A Private Equity Podcast Trends in Executive Comp for Private Equity Portfolio Companies – with Andrew Skowronski
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Sep 24, 2025 Andrew Skowronski, an executive compensation expert from McGuireWoods, dives into the intricate world of executive pay structures in private equity. He discusses the lifespan of a $50 million acquisition, focusing on key compensation elements like salary, bonuses, and severance. Andrew compares profits interests to stock options, revealing their tax advantages and flexibility. He also highlights trends in severance that scale with tenure and the rising use of performance-based vesting. The conversation is a treasure trove of insights for anyone in the private equity space.
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Size The Management Pool Right
- Allocate a 10–15% post-close management incentive pool on a fully diluted basis.
- Split the pool to give the CEO a meaningful share to drive value creation, often ~50% of the pool.
Rollover Drives Equity-Focused Pay
- Founder rollover and an endorsed CEO change incentive design from cash to equity.
- Buyers shift pay mix toward long-term incentives to align management with exit value.
Negotiate Management Pay Before Close
- Start management comp negotiations pre-closing and focus on salary, bonus, equity, and severance.
- Prioritize incentive equity and severance protections because cash rarely increases post-deal.