A PE-backed offer can show a larger projected payout while providing less dependable compensation. Compare annual opportunities, existing awards forfeited and private-equity proceeds separately, using the same period and explicit assumptions.
Separate annual compensation from existing awards
A recurring long-term incentive opportunity and an existing unvested award are different entries. The first concerns future compensation opportunities you may lose. The second concerns compensation rights already granted that departure may affect. Review award periods and vesting records to avoid counting the same value twice.
Also separate grant-date target value from current market value and eventual cash proceeds. Public-company awards can fluctuate or be forfeited. Private-company awards can provide substantial upside, but transfer restrictions, investor priorities and uncertain liquidity make headline values difficult to compare.
Build a comparison over the same period
The figures below are invented and describe target compensation value, not cash guaranteed or received. Assume three full years of service and full target bonus achievement. Assume the current employer makes a new annual long-term award targeted at $150,000, separate from $180,000 of existing awards retained by staying and forfeited by moving.
| Component | Stay at public company | Join PE-backed company |
|---|---|---|
| Annual base salary | $280,000 | $300,000 |
| Annual target bonus | $84,000 | $90,000 |
| Annual target long-term award | $150,000 | No recurring grant assumed |
| Three-year annual target total | $1,542,000 | $1,170,000 before private equity |
| Separate existing awards retained or replaced | $180,000 retained | No replacement assumed |
| One-time signing payment | None assumed | $40,000 |
| Total comparison value | $1,722,000 | $1,210,000 before private equity |
On these assumptions, the private-company equity would need to deliver $512,000 before tax to match the nominal comparison value. That amount provides no additional compensation for greater uncertainty or waiting for cash. It excludes taxes, benefit differences, moving costs, investment returns and discounting. Actual public awards may settle outside the three-year period and at different values.
Change the period and assumptions if the expected exit moves. An extra year may add another public-company award opportunity while leaving the private-company allocation unchanged. A company’s proposed sale date is an assumption unless the documents provide an enforceable payment right.
Calculate proceeds under the actual private award
Obtain the issuer, instrument, fully diluted percentage and distribution waterfall. Determine whether participation starts with current capital value or only above a hurdle. Model preferred returns, new capital, debt, expenses, dilution and staged grants. Our management-equity guide explains why an interest’s label does not establish its economics.
Ask the company to reconcile the offer, illustration and governing documents using identical assumptions. A chart showing a percentage of all equity value cannot establish a payout when the award participates in a different pool. See executive offer review for the complete document checklist.
Assess the company and the conditions together
Public reporting and a trading market may provide more information and liquidity for an established public company’s shares. They do not guarantee continued employment, bonus achievement or award value. A PE-backed business may have strong operations and substantial upside; sponsorship alone does not establish either quality or safety.
- Business: earnings quality, cash flow, debt obligations and customer concentration.
- Sponsor economics: invested capital, preferred returns, expected holding period and future funding needs.
- Employment: termination rights, severance, restrictive covenants and relocation commitments.
- Equity: vesting, repurchase, information rights, tax distributions and liquidity.
- Concentration: salary, bonus and equity may all deteriorate with the same business.
Use scenarios that show the actual consequences of a lower sale value, a delayed exit, termination before exit and no liquidity during the comparison period. Do not select a risk premium or probability merely because it makes the new offer appear attractive.
Negotiate the gaps the comparison reveals
Discuss recurring cash compensation, a separate replacement for existing awards, defined performance goals and protection for earned equity. Identify who must approve the changes and incorporate them into the controlling documents. Make-whole arrangements and departure protections address different risks and should be compared separately.
Review the tax character and payment schedule of each component. IRS Publication 541 addresses actual partnership interests; phantom compensation and deferred payments require their own analysis. A nominal pretax comparison is not an after-tax financial plan.
Common questions
Is private-company equity equivalent to public-company stock?
No. The instruments can have different economic rights, transfer restrictions, liquidity and tax treatment. Even public-company awards may be restricted or contingent.
Can I treat a projected exit value as annual compensation?
A projected exit amount should be modeled over its expected payment period and under the actual award terms. It should not be added to every year’s salary as though it were an annual payment.
Compare the complete compensation packages
Discuss the proposed documents and your earliest deadline with Philip Falco, Attorney & CPA.
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Authorities checked October 21, 2026. General legal and tax information. The result depends on the documents, applicable law, entity structure and tax year. Scheduling a consultation does not extend a signing, payment or election deadline.