Compensation Diligence & Equity Strategy for Private Equity

In today’s private equity environment, talent is a core asset. Yet compensation and incentive design remain among the most under-diligenced and least understood dimensions of a business.

How We Help

We help private equity firms and their portfolio companies evaluate, refine, and execute incentive strategies that attract and retain top talent, align pay to performance, and optimize equity pool utilization. Our approach is anchored in two principles. One is that incentive strategy is a high-leverage tool for driving enterprise value. The other principle is that strategy-linked incentives must permeate the organization—not merely sit atop it.

Pre-Deal: Compensation Diligence

Spot weaknesses in compensation before they turn into post-close surprises.

Our pre-deal diligence equips private equity investors with a full-spectrum view of a target company’s compensation infrastructure. We help you get clear, practical answers to questions like:

Is the pay structure competitive and sustainable, or will it need to be rearchitected to achieve future scaling goals?
Are there roles and individuals with apparently above or below-market compensation—and if so, how may this need to be addressed during the hold period?
Is there a coherent approach toward compensation decision-making, or are decisions ad hoc and founder-driven?
How do retention rates benchmark to market data, and how much does regrettable turnover correlate with compensation?
Is there evidence that the compensation strategy retains high-performing talent?
How has the equity pool been used historically and what type of utilization would be appropriate post-transaction?

Compensation Benchmarking (Base, Bonus, Equity)

We provide crisp analysis on how the company’s pay stacks up, using appropriate survey data to make market-based comparisons across role levels and functions. We also identify where upward adjustments may be required to ensure competitiveness or where there are excess misalignments in pay due to legacy decision-making.

Founder Pay Analysis

Founders often hold large amounts of equity in conjunction with below-market cash compensation. We collaborate with quality of earnings (QofE) providers to unpack these pay components and arrive at a normalized view of total compensation.

Job Architecture & Pay Structure Review

While there’s room for discretion in pay, decisions that are overly improvised won’t scale. Role-specific pathways that align promotion and pay with performance are key to attracting and retaining top talent. We help you evaluate whether the company’s compensation practices are built on clear leveling, progression, and performance alignment.

Turnover & Pay-for-Performance Insights

We analyze historical attrition by function, level, and geography to see whether there’s a discernible link between performance and rewards, and whether top talent is being retained.

Equity Diagnostics

How effective is the target company’s equity compensation program? We review how equity has been granted—who received it, in what amounts, and why. From there, we assess alignment with market practice, impact on retention, and the implications for post-transaction equity compensation strategy.

Governance & Maturity Assessment

Through interviews and documentation reviews, we assess the maturity of the company’s compensation decision-making processes: Are data sources used? Are decisions consistent and documented? Is there a compensation philosophy? Is the system scalable post-close?

Post-Deal: Compensation Strategy & Equity Program Execution

Enhance a portfolio company’s value with pay programs that create a competitive advantage.

We help portfolio company management or the private equity sponsor turn diligence findings into action. Solutions range from creating pay strategies that scale to designing smarter equity programs and building governance and communication systems that unlock real retention value.

Total Rewards & Compensation Philosophy Design

Develop or refine the benchmarking methodology and data sources in use
Apply the benchmarking methodology to the job architecture, including the allowable dispersion of pay between high and low performers
Develop a cohesive framework that links salary, bonus, and equity to performance and potential
Design pay ranges and governance infrastructure to ensure consistency and accountability
Document a compensation philosophy reflecting these decisions that provides a north star to management and the private equity sponsor

Job Architecture Development

Support the development or refinement of the company’s job architecture, including clear mapping of roles, career pathways, and advancement criteria
Ensure foundational alignment between organizational design and compensation strategy
Provide structure to support benchmarking, internal equity, and long-term talent scalability

Strategic Long-Term Incentive Plan Design for Value Creation

Design profits interest or other long-term incentive vehicles aligned with investor goals and exit timelines
Develop granting practices that align with the compensation strategy. Consider the innovative use of annual granting, catch-up provisions, phantom plans, and more to get the most from a limited equity pool
Calibrate individual awards in line with codified granting practices. Size awards in the context of future exit value and current fair market value while weighing the impact on total compensation
Develop role-based guidelines and operational processes for grant sizing and approvals
Ensure sufficient equity capacity is reserved for future hiring and sustained top performers

Governance & Plan Tracking

Build plan forecasting and monitoring tools to track usage, dilution, and pool health
Model burn rate and pool consumption across hiring and grant scenarios, helping to plan for future amendments and avoid equity shortages
Partner with internal teams to establish scalable equity program policies, including timing protocols, approval workflows, documentation standards, and audit trails
Provide ongoing support for plan recalibration, headcount growth, and investor reporting

Turnkey Equity Administration

Provide full-service plan administration using either our proprietary tracking solution or the company’s chosen platform
Support simple to complex private company cap tables, including management and participant reporting, modeling the impact of exit and other events in the context of the distribution waterfall, and updating information for employee entry and exit
Load and reconcile grant data, process forfeitures and updates, and deliver periodic reports to HR and finance
Maintain institutional-grade infrastructure that supports audit preparedness, due diligence transparency, and operational continuity

Valuation, Expense Reporting, & Audit Support

Perform, manage, or review 409A and other valuations of the business to set the strike price or hurdle rate for stock option or profits interests awards, respectively
Perform preliminary and final equity award valuations, including modeling fair value in the context of the waterfall schedule of hurdle rates and vesting provisions
Deliver monthly accounting expense reports and forecast equity cost projections based on headcount, forfeitures, and grant cycles
Provide detailed documentation and support across valuations, reconciliations, and grant activity to prepare for audits or capital events

Communication, Education, & Engagement

Deliver a full suite of communication tools, including:
- Personalized participant statements
- Employee-facing web portals
- Participant-facing brochures and FAQs
- Explainer videos
- Webcast and other on-demand resources
Tailor messaging by audience (founders, executives, employees) to align with equity literacy and company culture
Translate legal plan language into compelling value narratives that maximize perceived benefit and boost retention

Pay Equity Audit & Advisory

Perform regular pay equity audits to assess compliance with federal and state laws
Use statistical regression modeling to test for “equal pay for substantially similar work,” reduce the risk of legal challenges, and gauge how well pay practices align with the stated compensation philosophy
Provides critical insight to leadership on the potential for bias, legal risk, and program effectiveness

Investor & Board Reporting

Prepare strategic dashboards and narrative-ready materials for board and investor consumption
Summarize equity plan usage, burn rate, dilution, and alignment with business objectives in clear, actionable formats
Support investor relations and board oversight with reporting that links compensation to long-term value creation

Why Private Equity Firms Hire Us

Client focus. Our services are specifically designed for private equity firms and their portfolio companies, focusing on the insights that matter at each stage of the deal lifecycle.

Risk management. We pinpoint compensation risks before they create churn, morale issues, or unexpected budget adjustments after closing.

Reputation and breadth of experience. We’ve supported pre-IPO growth-stage leaders, newly public firms, and over 50 Fortune 100 companies. That gives us wide-ranging insight into modern compensation practices.

Ability to work across functions. We collaborate seamlessly with finance, legal, and HR, and speak the language of all three. Our clients consistently remark that we operate as a glue between their own internal teams.

Practical innovation. We bring both creative solutions and trusted-and-true best practices. Whatever the goal—adapting annual equity granting to the portfolio company life cycle, best-of-breed share pool tracking, or building flexible job architecture frameworks—we deliver the tools needed to turn compensation into a source of strategic advantage.

Let’s Connect

Whether you’re a deal team evaluating a target company or a management team looking to turn compensation and incentive design into a source of competitive advantage, we can help. Contact us to learn more about our PE-focused compensation diligence and equity strategy solutions.