Valuing Growth Shares

When it comes to incentivising your people, it is important to make sure that the value of the company today and in the future is as accurate as possible to ensure the scheme remains mutually beneficial for your business, its shareholders and your employees.

Growth shares can be a fantastic tool to enable a business to incentivise its management or employees to drive growth in return for receiving some of the value of a company over and above set hurdles. They are a special class of shares that, in contrast to EMI options or other option based incentive schemes, are subscribed for immediately. They typically have specific economic rights attached to them that means that, in the event of sale, the shareholder only benefits if the value of the company exceeds the predetermined hurdle.

How we can help

Design your growth share scheme

We can support in designing the most appropriate growth share scheme for your employees and the business; working to ensure that we get buy-in from your existing shareholders and fielding any queries they may have along the way.

Structuring the scheme

We combined Strategy, Corporate Finance and Tax experts to ensure that the scheme’s structure does not interfere with existing qualifying tax reliefs, preference shares or other relevant mechanisms, whilst still creating the right commercial outcomes for all.

Valuation

Utilising the most relevant methodology and sample data to suit your business’ exact needs, we will determine the most appropriate valuation for your growth shares. Valuations for growth shares are typically calculated using a Black–Scholes model. However, often the information input to these models is not the most commercially relevant or is too generic to be able to accurately calculate the valuation from. In other circumstances, Black–Scholes is simply not the right mechanism. Our team of experts specialise in analysing your company and its underlying assumptions to ensure that we understand the scenarios and events that will actually lead to value growth; and to identify when other valuation models may be more applicable.

Financial modelling and capitalisation table support

Modelling returns to all shareholders for a business that has ordinary shares, growth shares and perhaps other incentives such as EMI or preference shares too can get quite complicated. In this scenario it is important that all parties understand what they will receive, pre-tax and post-tax, at different exit valuation points. We regularly undertake this modelling for clients.

In circumstances where your business does not have a suitable forecast financial model and share capitalisation table, our team of experts can support in building these vital tools too.

Your valuation is likely to be part of a larger project which is why our advice extends across corporate finance, tax, recovery and business strategy, to support you towards your broader business objectives, whatever the circumstance.

Further reading: Growth Shares article