From carefully balancing the ambition of short-term targets with achievability of long-term visions, to finding the right remuneration to retain talent while maximising shareholder value, there is a lot to get right when it comes to implementing and managing your MIP.

And all this comes before the burden of administration: aligning dozens, if not hundreds of stakeholders across multiple processes; tracking changing ownership over the course of the programme; and keeping on top of your programme’s key performance indicators (KPIs).

With so many moving pieces, it’s not only difficult to gain a top-level view of your MIP, it’s also common to experience costly errors and missed opportunities.

In this article, we present six use cases of the Dealstack platform, illustrating some of the ways we’ve helped our clients to optimise their MIPs, both by reducing administrative stress and increasing efficiency.

1. Clear KYC efficiently

Know Your Customer (KYC) checks are a necessity for the creation of a MIP. Today, this is still an incredibly manual exercise, reliant on email exchanges between multiple parties. Highly sensitive documents are regularly and freely exchanged over email, often with a regular dose of back and forth to get it right.

You are obliged to complete KYC from a compliance perspective, but with increased regulatory complexity this has grown to encompass important documentation also for tax purposes, helping to identify potential obligations and liabilities now or in the future.

Accurate and timely filing of your Know Your Customer (KYC) documents is therefore vital to all parties involved in the MIP.

The process of distributing, collecting and filing these documents is a time-intensive and potentially expensive process. With dozens and potentially hundreds of KYC documents to complete and scrutinise, and constant onboarding and offboarding shifting the goalposts, the process is also prone to human error – not least in the case of documents going missing.

How tech can help

Clearing KYC on Dealstack accelerates and automates manual processes, while also reducing the risk of error. Dealstack does this in five key ways:

• Distributing your KYC requirements digitally ensures nothing goes missing in the post – literally, and metaphorically. Recipients can complete and submit their KYC documentation via the platform with clear instructions all along the way
• Making it easy for the participants in the MIP to provide the required documentation and to fill in, what is often, complex forms ensures less errors and much better onboarding experience. Dealstack’s data driven approach ensures that we provide the right instructions at the right time, reducing questions and mistakes
• With a single, standardised procedure, onboarding, offboarding and keeping track of relevant parties also becomes simple, easing the administrative burden and allowing all parties to act with total agility and to evidence compliance with the obligations under the 4^th anti-money laundering directive
• Storing KYC documents automatically in a single source of truth ensures they can then be accessed quickly and seamlessly, at any time, and by any party who requires them. Data subject access requests can be handled with ease, without the need to rummage through hard drives, inboxes etc.
• Ensuring GDPR compliance, by enabling you to clearly tell investors what information you hold on them, where, and how it’s stored. Plus this is all behind password, taking sensitive information away from potentially dangerous email exchanges

“While private equity has largely adopted digital document signing, the process is often fragmented - documents are sent via individual links without a unified or coordinated approach. This not only adds complexity but increases the potential for oversight.”

^{Ashley Banks
Head of Product, Dealstack}

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2. Automate your legal documents

In Private Equity, legal documents need to be precise and watertight, especially given the large sums of money involved and duty to investors. Drafting, completing, and managing these documents can be time-consuming, especially when done manually or involving external legal counsel.

Documentation is often drawn up on an individual basis, potentially incurring huge costs – especially when these documents need to be produced for hundreds of investors.

Then comes distributing these documents to signatories, collecting and filing them, which is another job unto itself. To manage the administrative burden, many firms outsource these responsibilities, but this can lead to added costs and complexities, and with so many parties involved human error is common.

How tech can help

Working from a platform like Dealstack, you can localise all of your most essential documentation into one place. This benefits you in four ways:

• Automating individualisation of all legal documents at scale, with all your data readily available within the platform, ready to be populated and executed.
• Working synchronously between all major parties to ensure that documentation is distributed, received and explained, all from within one platform, rapidly accelerating the process and reducing the risk of error
• Completing documentation by allowing counterparties and signatories to electronically sign, removing the build-up of a disorganised paper trail and ensuring instant signing of essential documents. Manual signature processes are also available, if you require original documentation/notarial execution.
• Securing documentation, saving executed copies in a structured way and stopping it from falling into the wrong hands by ensuring only relevant parties have access

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3. Automate onboarding and offboarding of participants

There is a high likelihood that you will need both to onboard and offboard MIP participants over the course of your deal. This process brings with it a load of administration.

From deciding key terms and amounts, to calculating implied share allocations, clearing KYC, tracking payments, and drafting and executing individual documentation, onboarding and offboarding may feel like the most time-consuming process of all.

Managing all these workstreams and implementing documentation requires a lot of attention to detail. This can be labour-intensive, particularly when people join or leave. Depending on the size of the equity plan you manage, you may have to multiply this for tens, or hundreds of people.

Naturally, the onus falls on your various teams to manage the turnover of people, and many organisations choose to outsource this responsibility at great expense. Thankfully, technology can help to ease the administrative burden of onboarding and offboarding.

How tech can help

Through specialist platforms like Dealstack, onboarding and offboarding becomes a simple process that can be managed in a few clicks, and at scale. With technology, you can:

• Process joiners and leavers through simple workflows that take a few clicks, in minutes, not hours
• Leverage our contracts engine to record joiners and leavers, automatically individualising each legal agreement at scale
• Track the progress of joiners and leavers in a single view
• Maintain an audit log of all changes, ensuring a single source of truth is always kept up to date and that you always have accurate data

“One of the biggest problems we hear about is knowing who owns what, how much people have invested, and how much it’s worth. Answering these questions requires trawling through long, complex cap tables in Excel, and you can never be sure you’re looking at the right set of data.”

^{Sebastian Lapinski
Chief Operating Officer & co-founder, Dealstack}

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4. Keep track of ownership

Many firms rely on legacy systems to manage equity plans and cap tables, often relying on outdated tools such as Excel spreadsheets – formats that open the door to manual errors, and which are difficult, if not impossible to attach legal documents to, let alone share easily. If not properly addressed, these could result in millions of lost funds, legal implications, and irreparable reputational damage.

Not only that, analysing cap tables when it comes time to execute changes in ownership, process transactions, manage individual ownership, or provide transparency at the time of reporting, all create considerable paperwork that takes many people-hours to complete.

That’s saying nothing of the undue stress that is so often caused in the case of calculation errors, missing filings, handing over simple tasks, and even training new joiners in how to utilise these formats.

How tech can help

By centralising records of ownership into a single source of truth, you can move away from Excel spreadsheets and never look back:

• Easily track and manage ownership across complex corporate structures. Process transactions in a few clicks, with automatic synchronisation of data, and without technical complexity
• Manage all functions from a single source of truth, whether it’s providing equity incentives, new money injections or distributions
• Gain a strategic oversight of your total fund value with simple visualisations, automatically updated based on your data
• You will never need to diligence your own equity structure ahead of exit again

5. Enhanced security

Your MIP is a set of highly sensitive documents, containing details of your executive team’s incentives and equity. It reveals the names, equity stakes and possibly even sensitive personal information of shareholders. Ensuring the security of your plan and preventing this information from leaking is a huge responsibility.

Currently, this information is freely exchanged over email and can easily be sent to the wrong person (we’ve all been there). Using a secure, central system of record ensures no risk of sensitive information stored in internal (or external) hard drives, but also ensures GDPR compliance.

Intercepted mail/email, blunt-force hacking, and even simple misplacing of documents all risk putting sensitive information into the wrong hands.

This is especially true if your data is scattered across multiple outsourced third parties. Can you, for instance, respond to data subject access requests without incurring a significant cost or time burden?

While these events may be rare, the consequences of such intentional or unintentional leaks can be astronomical – especially given the potential legal costs involved after the event. The best safeguard against these possibilities is to ensure your documentation is stored securely.

How tech can help

Any third party you engage with should adhere to the highest standard of security requirements, such as complying with ISO27001 and/or regular SOC2 Type II audits. This is where a platform like Dealstack can help:

• Top-of-the-range security measures ensuring data security measures are constantly updated and tested according to changing standards of best practice
• Secure networks with data stored in the cloud reduces the risk of both blunt-force attacks and accidental data loss
• Single Sign-On (SSO) and Multi-Factor Authentication (MFA) adding layers of security, making it harder for unauthorised users to gain access, while streamlining the login experience for authorised users
• GDPR compliance ensures no data is held unnecessarily, that your firm is able to respond to subject data access requests, and that unnecessary personal data can be removed when needed. This reduces the risk of exposure to legal complications in the EU

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6. Enable broad ownership – and better incentives

Your success depends upon your people. It’s therefore important to create a compensation package that attracts, retains and incentivises your talent appropriately. In today’s world you need broad employee ownership to stay competitive in the hunt for the best talent across all levels of the company. It is also proven to boost employee engagement which has direct knock-on effects on your company’s performance. This can be worth millions!

But creating and maintaining broad plans can be difficult, especially when the process is largely manual. Unfortunately, this means many companies miss taking advantage of the opportunity provided by broad employee ownership and its effects.

To reduce the ever-growing mountain of administration and make broad ownership accessible to all companies, you need a platform to automate transactions and communications with key participants and stakeholders.

How tech can help

Dealstack allows all stakeholders – internal, external, and employees – to access a single source of truth for data about the broad ownership plans.

• Implement broad plans at minimal cost, complexity or barriers to entry
• Engage and update employees through clear communication about their investments or incentives and legal documents
• Track transactions and ownership seamlessly despite having a broad and dynamic ownership plan

Technology built for private equity, by private equity

Devising a management incentive plan is a process that requires significant time, labour and expertise.

Historically, private equity funds have relied on now-outdated tools to manage this process. In the absence of a purpose-built platform with the ability to distribute, populate and execute documents, track ownership and manage security, many funds have relied on outsourcing to handle these functions.

However, these legacy ways of working have led to significant costs in terms of time and money – resources that could be better spent focusing on other, more profitable jobs.

Dealstack was created by private equity practitioners who understand these problems first-hand. As a truly end-to-end and all-in-one platform, it allows your team to collaborate securely and seamlessly throughout the entire MIP process, involving all investors, executives and other relevant parties, with document automation and e-signature solutions built in.

With MIPs growing in size, operational complexity will only increase moving forward. By adopting technology today, you can both stand out from your competitors and future proof your operations.