B2B Services Management Incentive Plans (MIP): An Independent Sponsor's Counsel
Structuring Management Incentive Plans (MIP) on B2B services deals, with the structure protection and capital connectivity an independent sponsor actually needs.
An independent sponsor closing B2B services transactions in the $8M to $90M EV range has a defined set of moves at the Management Incentive Plans (MIP) stage. Most of them are not in a generic M&A textbook.
The typical B2B services platform sits at $8M to $90M EV with EBITDA in the $2M to $18M range. The thesis runs on recurring revenue service platform with bolt-on operators. Most B2B services deals look better in the CIM than in the data room. Skip the CIM, ask for the contracts.
How Management Incentive Plans (MIP) actually gets structured.
Size the MIP at 10 to 15 percent of post-close equity, with 60 percent time-vested and 40 percent performance-vested.
Use profits interests for tax efficiency, with a clear strike value at grant.
Build double-trigger acceleration on change of control plus termination.
Document the MIP in the LLC operating agreement, not in a separate plan only.
In B2B services, layer in MSA assignability mapped customer-by-customer as part of the Management Incentive Plans (MIP) workstream.
Promising the MIP percentage in the LOI without modeling the impact on the LP waterfall. The LP finds out and the deal stalls.
"MIPs are the cheapest retention tool you have. Use them deliberately, document them precisely."Jason Powell · Management Incentive Plans (MIP)
The deal is one thing. The capital that opens up after close is another.
Capital after close is where the IRR actually gets made. The right introductions at month nine through month thirty are where this practice works as hard as it does at the LOI.
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An LOI on the desk, a B2B services target, and a Management Incentive Plans (MIP) question worth a real conversation.
Twenty minutes of practitioner-grade input from a securities attorney whose first move is to read the deal, not the engagement letter.