Global Financial Services Institution Case Study

A transformational acquisition effectively doubled our client’s size, created overlap and potential conflict in core revenue streams, substantial opportunities for synergy in other markets, an infusion of new talent, and cultural and operating model differences to work through.

Opportunities and risks were in abundance as the Company worked through the integration of organizations, their systems, and customer overlaps.

Its core markets were also undergoing rapid evolution, the Company needed to gauge the pace of cannibalization of its legacy revenue streams.

Management identified multiple strategic paths and also believed its own operating model and leadership team was likely to continually evolve.

Seeking to preserve strategic optionality, leadership believed locking in on fixed operational goals could be counterproductive

To put focus on “the prize” of the whole being greater than the sum of its parts, we worked with the management team to identify broad aspirations for raising market cap—a goal that would require growth rates well above sector forecasts. The growth curves were understood to vary under different strategic options, so the time-to-achieve also needed some flexibility.

• We designed multi-tranche price-vested performance shares with vesting periods that layered over 4, 5, and 6 years from grant. The price conditions were set so that the furthest tranches produced leverage well in excess of peer competitive opportunities
• The long-dated nature of the PSUs created less near-term liquidity than a typical vehicle with 3-year ratable vesting. As such, we balanced the new grants with 3-year RSUs for employees deeper in the organization
• Further, termination conditions were tailored to balance long-term commitment to the Company with Board flexibility to accelerate vesting partially or fully in order to accommodate expected evolution of the management team

• Management’s instinct to preserve strategic flexibility proved out. New product opportunities and the pace of disruption in its markets presented growth paths that were successfully met
• The Company’s top-line growth exceeded sector levels and its operating margin expanded considerably, leading to a sector-dominant earnings valuation
• The management team and its organizational model went through continual evolution; the upside from equity compensation was retentive but the ability to tailor exit packages as the team evolved was also effective
• Shareholders responded positively to the design and Say on Pay results were positive as well