PE Equity Participation Plans 2025

In short: At a private equity-backed company, the management equity pool averages about 9% of fully diluted equity. The CEO typically receives around 3.2% of that pool and the CFO around 1.2%. Most equity vests on a 3-4X multiple-of-invested-capital (MOIC) hurdle, and the structure used depends heavily on geography - profits interests in the US, sweet equity in the UK and Europe.

Pool size: mean 8.9% of fully diluted equity (median 9.8%), with little correlation to company size.
Who gets what: CEO ~3.2%, COO/President ~1.7%, CFO ~1.2%, Chair ~1.5% (mean allocations).
Vesting: 54% of plans require a 3-4X MOIC (or equivalent IRR) before management equity fully vests.
Structure is regional: profits interests lead in North America (38% of US plans); sweet equity dominates the UK and Europe (71%).
The payout gap: 41% of executives who reached a liquidity event were paid below 75% of their base case - only 8% of PE professionals expect that outcome.

The management incentive program is the mechanism a sponsor uses to align portfolio company executives with investors. Yet its structure, tax treatment, and performance hurdles vary widely - even the vocabulary differs by geography. Vardis's Portfolio Company Equity Participation Plans report draws on responses collected worldwide from June to October 2025, from both portfolio company executives and the private equity professionals who design these plans.

8.9%Mean management pool (median 9.8%)

3.2%Mean CEO allocation

1.2%Mean CFO allocation

3-4XMost common MOIC hurdle (54%)

How big is the management equity pool?

The management incentive pool averages 8.9% of fully diluted equity, with a median of 9.8%. Distribution is relatively flat with little correlation to enterprise value - pool size is more a function of plan philosophy than company scale. Notably, pool allocations have fallen more than 15% since 2020.

Allocation by role

Within the pool, allocation follows a consistent hierarchy. The CEO and CFO are named among the five largest equity holders in 96% and 93% of companies respectively, making them the near-universal anchors of every plan.

Equity pool allocation by role at PE-backed companies (% of the management pool). Source: Vardis Portfolio Company Equity Participation Plans Report.

The COO/President award is bifurcated - clustering around 0.75% and again near 2% - because the title appears in only about half of companies and awards are skewed by whether the role carries revenue responsibility (those without it receive awards 40% smaller). Eligibility ranges from CEO-and-direct-reports-only (30% of plans) to broad participation across management ranks (18%).

Plan structure is geographic

Across all responses, the leading structures are profits interests (29%), equity-based bonus (27%), and stock options (25%), with sweet equity at 9%. But the regional split is stark:

Primary equity plan structure by region (% of plans). Source: Vardis Portfolio Company Equity Participation Plans Report.

Structure	N. America	EU / UK
Profits interests	38%	2%
Options	28%	8%
Equity-based bonus	25%	7%
Sweet equity	2%	71%

In North America, profits interests now represent 38% of plans, up from under 30% in 2020. In the UK and Europe, sweet equity - discounted share purchase - dominates at 71%. Worldwide, 60% of plans sit in structures where gains are taxed as ordinary income.

Vesting and the MOIC hurdle

Equity rarely vests on time alone. Most plans tie vesting to time, performance, or a blend of the two, with full vesting linked to a return hurdle that accelerates at liquidity. The market standard is a 3-4X multiple of invested capital (or equivalent IRR), used by 54% of plans; another 26% set the hurdle at 2X or less. The vast majority (78%) confirm that the plan's targets are the same single, consistent set used to secure deal financing.

The perception gap

Base-case payout expectation gap between executives and PE professionals. Source: Vardis Portfolio Company Equity Participation Plans Report.

Among executives who have been through a liquidity event, 41% report payouts below 75% of the original base case - and for 30% of those, below half. Yet only 8% of PE professionals believe payouts come in under 75%. The base case is a planning tool, not a guarantee, and the gap between executive experience and sponsor expectation is one of the most important dynamics in incentive design.

Cite this research. Referencing these figures? Please credit Vardis and link back:

Source: Vardis Portfolio Company Equity Participation Plans Report.
https://vardis.com/pe-equity-participation-plans

Key terms, defined

Management incentive plan (MIP): The pool of equity a private equity sponsor sets aside for a portfolio company's leadership team, designed to pay out at a liquidity event and align management with investors. At PE-backed companies it averages about 9% of fully diluted equity.
Profits interest: A US equity structure granting executives a share of value created above a threshold, typically taxed as capital gains. It is the leading structure in North America, used in 38% of US plans.
Sweet equity: A discounted share-purchase program in which executives buy equity on favorable terms alongside the sponsor. It dominates the UK and Europe, used in 71% of EU/UK plans, but is rare in North America (about 2%).
Phantom equity: A cash-settled appreciation right that mirrors equity value without granting actual shares - the executive receives a cash payment at exit tied to the increase in company value.
MOIC hurdle: The multiple of invested capital (or equivalent IRR) that a deal must return before management equity fully vests. The market standard is 3-4X, used by 54% of plans.

Profits interest vs sweet equity

	Profits interest	Sweet equity
Primary region	United States	UK & Europe
How it works	Granted share of value above a threshold	Executive purchases discounted shares
Up-front cost to executive	None	Buy-in required
Typical tax treatment	Capital gains	Capital gains (varies by jurisdiction)
Prevalence	38% of US plans	71% of EU/UK plans

Frequently asked questions

How big is the management equity pool at a PE-backed company?

The management incentive pool averages 8.9% of fully diluted equity, with a median of 9.8%. Pool size shows little correlation to enterprise value, and allocations have declined more than 15% since 2020.

How much equity does a CEO or CFO get in a PE portfolio company?

Within the management pool, the CEO receives a mean of about 3.2% (median 3.0%) and the CFO about 1.2% (median 1.0%). A COO or President typically receives 1.7%. The CEO and CFO are named among the five largest equity holders in 96% and 93% of companies respectively.

What is sweet equity?

Sweet equity is a discounted share purchase program in which executives buy equity at favorable terms alongside the sponsor. It is the dominant structure in the UK and Europe, used in 71% of EU/UK plans, but rare in North America (about 2%).

What is a profits interest?

A profits interest is a US equity structure that grants executives a share of future value creation above a threshold, typically with capital-gains tax treatment. Profits interests are the leading structure in North America, now representing 38% of US plans, up from under 30% in 2020.

What MOIC hurdle must be met for equity to vest?

The most common hurdle is a 3-4X multiple of invested capital (or equivalent IRR), required by 54% of plans for full vesting; another 26% use a hurdle of 2X or less. Most plans blend time-based and performance-based vesting that accelerates at liquidity.

Do executives' equity payouts usually meet the base case?

Often not. Among executives who have experienced a liquidity event, 41% report payouts below 75% of the original base case, and 30% of those below half. By contrast, only 8% of PE professionals believe payouts fall under 75% - a significant perception gap.

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Source: Vardis Portfolio Company Equity Participation Plans Report. Portfolio company executives and PE professionals surveyed worldwide, June-October 2025.