CLIENT
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Privately-held investment company with a diversified group of businesses |
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SITUATION
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Major investors wanted to align executives’ decisions and behaviors with growing long-term shareholder value. The goal was to share a portion of returns above investors’ required rate of return with the executive team, while ensuring that the team pursued whatever actions were necessary to maximize the long-term value of the portfolio. |
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APPROACH
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Over the course of three months, ThreePoint Consulting:
- Calculated the current value of the portfolio of businesses based on recent performance and forecasted cash flows
- Clarified the investor group’s required rate of return
- Determined what percentage of returns above the required rate of return investors were prepared to share with executives
- Designed the Phantom Stock Plan with the future value of grants tied to excess returns
- Determined how divestitures, acquisitions and special dividends would be treated
- Conducted extensive financial modeling to demonstrate potential rewards for executives as well as the implications for investors over a range of financial performance scenarios
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RESULTS
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Investors and the executive team unanimously supported the introduction of the new long-term incentive plan. The Phantom Stock Plan has helped drive significant value creation across the business portfolio. |
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