Valuation

Post-Vest Holding Periods

More companies are considering implementing mandatory holding periods on vested awards for executives. They’re a way to help align longer-term incentives between management and shareholders, they make it easier to enforce clawback provisions, and they can even reduce compensation expense via a valuation discount (a discount for lack of marketability, or DLOM). But post-vest holding periods need to be implemented in the right way to qualify for a discount and avoid recipient frustration or administrative difficulties.

Services

Equity Methods’ valuation and scenario analyses help compensation teams decide whether to incorporate post-vest restrictions into your equity awards. Specifically, we can do the following:

  • Evaluate the pros and cons of adding post-vest holding period restrictions to some or all of the awards granted, including whether those restrictions can give rise to a valuation discount under ASC 718
  • Perform pro forma cost estimations of the discount associated with the holding period restriction under various best-of-breed valuation models
  • Develop ASC 718-compliant valuations of the post-vest holding period discount

Weigh the tradeoffs of mandatory post-vest holding periods to make the most effective decision for your unique situation.

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Meet Our Experts

Nathan O’Connor

Managing Director

David Outlaw, CEP

Managing Director, Valuation & HR Advisory Services

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