With more than $1 trillion in private-equity (PE) money invested in mid- to large-size companies in 2025, the need to effectively align the financial interests of the executives working for portfolio companies (PortCos) with their PE owners has never been greater.
Results from WTW’s 2026 Portfolio Company (PortCo) Long-Term Incentive Plan Designs Survey provide insights that can be used by current PortCos, prospective portfolio companies and investors to understand market trends and strategy. The survey, conducted from November 2025 to January 2026, collected plan details from 47 companies with a median value at the time of investment of $600 million, asked several questions related to plan designs, including:
- How many shares (as a percentage of undiluted total shares outstanding) into the PortCo were set aside for grants to executives and key employees? Also, what percentage of this pool was allocated up front, at the time of the PE investment?
- Which equity vehicles were used to deliver these awards?
- What performance goals, if any, were executives and key employees required to meet in order to vest in these awards?
- Were executives required to invest their own money via co-investment, or “rollover,” when the PE firm invested?
LTI pool size and initial allocations
The median LTI pool size was 10% of undiluted total shares outstanding and, at median, 75% of this pool was allocated to participants up front. The remaining 25% was reserved for new hires, promotions and other special awards. Notably:
- A median pool of 10% is consistent with previous WTW studies. Historically, this percentage is inversely proportional to investment size. Larger investments (more than $1 billion) tend to have a smaller percentage set aside for LTI awards, while smaller investments (less than $200 million) tend to have a larger percentage set aside.
The reported practice of making most awards up front rather than making smaller awards each year is also consistent with historical PE PortCo practice. PE sponsors prefer making larger one-time awards early so that executives are fully aligned with their interests for the duration of the investment.
The median number of initial participants in the plan is 15, or about 2% of the total PortCo employee population. Table 1 reflects median allocations of the total pool by top executive title and level.
Table 1. Median allocations of total pool, by top executive level
Executive | Approximate allocation as a percent of pool |
| CEO | 23% |
| CFO | 7% |
| Other C-suite (each) | 3% |
- PortCo equity-based LTI plans tend to have lower participation than similar-sized public companies. Many PortCos compensate for this by adopting cash-based long-term bonus plans for key employees not selected to participate in the equity plan.
Use of equity vehicles
Profits interest units (PIUs) were the most common equity vehicle used for grants, with 50% of respondents reporting that they granted PIUs in their plans. Stock options (30%) and restricted shares or share units (28%) were the next most popular vehicles.
PIUs are popular with companies that are structured as limited partnerships (LPs) or limited liability companies (LLCs) taxed as partnerships, as the earnings on PIUs can be subject to long-term capital gains tax rates in the United States. C-Corporations, S Corps or LLCs that are taxed as corporations cannot grant awards that are eligible for capital gains taxation.
Performance goals in vesting terms
According to the results, 43% of respondents said that some — but not all — of the awards tied vesting to performance goals, and 28% said that all awards were subject to performance conditions.
Multiple of invested capital (MOIC) and multiple of money (MOM) are the most common performance goals (79% of respondents total). Other common goals include PortCo equity value growth (21%) and internal rate of return (18%). Additionally:
- 30% of awards with performance conditions had more than one goal.
- Performance goals (e.g., MOIC or MOM) most commonly measure the total return to the PE sponsor, not the growth in value of the PortCo business itself. Only one-fifth of respondents reported using PortCo financial achievement (e.g., EBITDA, revenue) as a performance goal for their awards. However, the value of each equity unit granted is inherently tied to the value of the PortCo itself.
Rollover requirements and co-investment opportunities
Only 32% of respondents reported that the PE sponsor required a rollover of sale proceeds as part of their investment, and 39% reported a voluntary co-investment program. At median, only four employees were required to roll over any part of their sale proceeds. The typical rollover requirement was 20% of proceeds, while there was no limit on voluntary co-investment.
While required rollovers may provide a tax deferral opportunity on rolled-over value, most firms (84% of respondents) did not offer any other special value upon rollover such as a company match or discount on shares purchased.
A look back, and the road ahead
Overall, these findings are consistent with WTW’s 2023 study of PE PortCo LTI designs. The two most significant changes since those results were published are the increased granting of PIUs over stock options, and the increased use of MOIC-type performance goals in vesting terms. Both trends align with PE sponsors’ common objectives to maximize after-tax earning opportunity, and to maximize return on investment for fund investors.
For companies that are considering either privatization or PE investments, it is imperative to understand how LTI plans balance financial opportunity, risk and retention concerns. For example, a smaller equity pool where the awards come without performance conditions or have tax-preferred earning opportunities may provide the best earning opportunity for participants.
For private equity firms, the optimal plan design likely extends beyond a one-size-fits-all approach on acceptable dilution rates and MOIC/MOM hurdles. Investment size, industry, expected investment length and the need to retain the executive team should all be considered before adopting an LTI plan. When designed thoughtfully with a good communication plan to explain its terms, a PortCo LTI plan can provide a mutually rewarding opportunity for both investors and PortCo management.
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