Management Equity philosophy explained

As a Group, we follow a philosophy of Management Equity, where operating company senior management teams invest directly in the businesses they are responsible for, thereby aligning management and shareholder interests.
Where we acquire a majority stake in a business, the shares remaining with the founder management are called "first generation shares". There are no material changes to the rights belonging to these first generation shares retained by founder management. Our model also enables senior management to acquire "second generation shares". This will often be when the first generation shares have been acquired by Empresaria and we want to incentivise the next tier of management in the operating company to grow its business to the next level. Management buy these second generation shares at market value, investing their own cash, which is at risk if the business does not perform. To help lower the market value of the second generation shares (to make it affordable for management to acquire a meaningful stake in the business they are responsible for) and to protect the profit that we have already acquired, we set a 'threshold profit' level for valuing second generation shares. These second generation shares only start creating value for management if the profit grows above the 'threshold profit' level. The second generation shares typically have restrictions, such as limited or no entitlement to dividends and the fair value paid by the management shareholder reflects these restricted rights.
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