Key takeaways:

Although there are several measures and approaches available for the company to consider, there are three key aspects we recommend clients consider before finalizing the preferred approach:

• Current liquidity in the system (i.e., available cash, current cash burn/generation rate and potential costs of realization)
• Current vested versus unvested award portions, where the company needs to ensure that there is an effective balance between the award monetization and the participant having sufficient “skin in the game“ to drive retention and motivation for future value creation
• Exit event timeline – the longer or more uncertain the exit event, the more likely it is for the company to consider the key performance milestones for the participant. Alternatively, if the exit timeline is concrete and has planned milestones, then perhaps the company needs to consider the communications strategy to ensure the participants understand the award structures and the potential value gains available to them

Aon’s recommendation for companies navigating these challenges is to review and refine the equity compensation strategy with a view to ensuring that the plans are still best positioned to deliver on creating the ownership mindset and value creation with any potential Round of Funding, IPO, SPAC or other corporate transaction. The strategy should be treated as an instrument for driving shareholder value and not to be treated as being the end result itself.