Employee Share Incentive & Management Packages Valuation
The valuation of employee share incentives and management equity plans is a highly specialised discipline. These instruments often contain complex performance hurdles, vesting conditions, and option-like payoffs that cannot be valued using standard techniques. A robust, defensible valuation is critical for financial reporting compliance and for ensuring fairness in corporate transactions.
Our Role
We provide independent, expert valuations of all forms of equity-based compensation for financial reporting (IFRS 2), tax compliance, and strategic planning purposes. We specialise in modelling complex and bespoke incentive structures to deliver accurate and audit-ready valuations.
We determine the fair value of equity-settled and cash-settled share-based payments at their grant date, as required by IFRS 2. Our valuations provide the basis for recognising the compensation expense over the requisite vesting period.
We employ sophisticated option pricing models, including Black-Scholes for standard options and Monte Carlo simulations for instruments with complex, market-based performance conditions such as Total Shareholder Return (TSR) hurdles.
We value complex management incentive units (MIUs) and other private equity incentive schemes, using methodologies like the Option Pricing Model (OPM) or Probability-Weighted Expected Return Method (PWERM) to allocate value in multi-class capital structures.
We model the value of management incentive packages under various exit scenarios, such as a sale, merger, or IPO, providing clarity to sponsors and management on the potential proceeds and distribution mechanics.
Quantitative Modelling Expertise
Our team possesses deep expertise in financial engineering. We do not apply a one-size-fits-all approach. We select and build the most appropriate valuation model to capture the unique features of each plan, from simple options to complex awards with path-dependent vesting conditions, ensuring the methodology is robust and fit for purpose.
Defensible and Audit-Ready Valuations
We deliver more than a number; we deliver certainty. Our valuation reports provide a clear and coherent explanation of the instrument's features, the valuation methodology employed, and the key inputs and assumptions used. This transparency, combined with the rigour of our analysis, results in a valuation that is built to withstand the most demanding scrutiny from auditors and regulators.
Confidential Consultation
For a robust and defensible valuation of your management incentive schemes, please contact us.