Portfolio
A founder owned cosmeceuticals business
Needing an experienced CEO to take it to the next stage of growth, the founder of this international business turned to Juno Partners to help devise a scheme that would be both attractive and transparently focused on sustained gains in the value of the business - without issuing shares.
Background
Foundered more than two decades ago with the aim of bringing the best insights of clinical practice and research to the development and manufacture of skincare products, our client had grown to enjoy a turnover of more than $30m and to employ more than 70 staff.
But to take the business to its next stage and fully capitalize on export opportunities, the founder and his advisory board recognised the need to appoint a CEO with not just the right industry contacts, but with a track record of taking an Australian brand to the world.
The perfect candidate was found but not surprisingly drove a hard bargain on remuneration – central to which was sharing in the upside she helped create. With goodwill, both parties set the final details aside and started working together.
The problem
But 18 months later a suitable equity plan was yet to be agreed and had become a major source of dissatisfaction in the relationship between founder and the new CEO.
A number of issues prevented agreement, including:
What was an appropriate number of shares to issue?
Should the shares be issued as a lump sum or over time?
What was a fair value for the company at issue date?
What hurdles if any should be met before the equity was issued?
What rights did the CEO have in the event she left the company?
The solution
Recognising the sensitivity of the issue and the need to get it right the first time, the founder engaged Juno Partners to review the situation and design a scheme acceptable to both founder and CEO.
Drawing on interviews with the CEO and members of the Board and our deep experience in incentive plan design, we developed an innovative and transparent plan that not only rewarded the CEO handsomely in the event of a sale of the business, but also allowed for milestone cash payments tied to sustained gains in the profitability of the business. Importantly, the plan was scalable, ie capable of being offered to other senior executives as the business grows.
Although the two parties had become defensive and a little cynical before our involvement, the new plan was seen by both sides to offer a fair and reasonable solution and was agreed without rancour.
In this instance, our ability to play an independent, ‘honest broker’ between the two parties, combined with our ability to develop an innovative, workable solution was vital in resolving our client’s impasse and letting their attention rightly return to growing the business.