A comprehensive multi-chapter guide covering the 9 essential steps to running a successful employee liquidity program.
Running a successful employee liquidity program is one of the most complex and consequential initiatives a private company can undertake. This comprehensive guide walks you through the nine essential steps, from initial planning to post-transaction management.
Table of Contents
Eligibility Criteria
Defining who can participate in your liquidity program — tenure requirements, vesting thresholds, minimum share quantities, and how to balance inclusivity with administrative practicality.
Buyer Selection
Evaluating potential buyers for your secondary program — strategic investors, dedicated secondary funds, family offices, and the tradeoffs between different buyer types.
Pricing Methodology
How to determine fair pricing for secondary transactions, including 409A considerations, recent round pricing, market comparables, and discount factors.
409A Impact Assessment
Understanding how your liquidity program will affect your company's 409A valuation and future option pricing — and strategies to manage the impact.
Due Diligence Process
Managing the due diligence requirements of secondary buyers while protecting sensitive company information and maintaining operational focus.
Employee Communication
Crafting clear, compliant communications that help employees understand the opportunity, make informed decisions, and manage expectations.
Legal Considerations
Navigating securities law compliance, transfer restrictions, ROFR provisions, and the legal documentation required for a well-structured secondary program.
Tax Implications
Helping employees understand the tax consequences of participating in a liquidity program, including income tax, capital gains, and AMT considerations.
Messaging Strategy
Developing internal and external messaging that positions your liquidity program as a strategic initiative that benefits employees, the company, and its stakeholders.
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