What is Equity

is really history: Fourteen years of hard work has paid off for Enrique: he rose to executive vice president of privately-owned company that is one of the country's largest providers of continuing medical education for surgeons. He was number two in the company's founder, and the only non-family member among senior executives, the majority. Enrique is consider all the good prospects for starting a business one day. The founder, who was 64, he talked about retirement for some time.

One Friday morning in a private meeting with the company's founder, Enrique was informed that the family decided to sell the company "private equity" [sometimes referred to as "PE"] firm, a company that invests capital pension funds, endowments, foundations and wealthy individuals in a company with about revitalizing them so you can later sell them or the public at large profits. Enrique was convinced that if the sale went through, he would have job security because customers are intent on hiring him to run a business for them. Enrique will also be receiving heavy bonus - a "success fee." - If the deal is closed, to encourage him to stay through the closing and to align their interests with the family

After the meeting, "PE" of the team, who were based in Boston, Enrique was convinced that he will soon have its "day in the sun." Not only would become CEO, but was offered a share of the PE firms get the eventual resale of the company. Enrique did all he could to the family sold the place, and the transaction is expected to close in several weeks. One of the problems arose: Enrique just could not seem to get the attention of Jeremy, PE of a partner who was shepherding a job, to discuss their terms of future employment. Enrique is hoping to "raise the platform," he'd enjoyed in recent years, with a large increase in base salary, incentive compensation, benefits and long-term benefits, in accordance with the new, CEO-level responsibilities. However, he was not able to get Jeremy attention, until the day before closing.

Just a few hours before the sale is to take place, Jeremy called Enrique and listed the proposed conditions of his new employment: first, his salary will be reduced to "only" 20%. Second, the benefits and perq in decreased considerably. Third, Enrique was to be rewarded with a share of profits to PE (as defined), when they sold the company in several years, provided that there is still time to his job, which is not guaranteed. Perhaps most troubling, Enrique is guaranteed only one year of employment, but his contract included a three years' non-compete "agreement. His lawyer said: "Your contract has more holes than a loop hooked rug ."

Enrique signed his new contract, the closing took place, and he became CEO. "Ride" was not at all what they expected, though. It's just not the same company. Significant debt immediately added that the company balance sheet, which was used for the award of PE investors. Costs, including compensation to employees at all levels, fostered many common benefits and holidays, were reduced. Yes, it's different companies with different goals and different values​​. While Enrique is the chief executive officer, financial limits has left him with little real say or control over how the company operated ... It is now a "portfolio" companies, which took place, primarily, only to soon be sold as "inventory ."