BC Partners Said to Shift Profit to `Eat What You Kill'

Updated on
  • Buyout firm will move more of its profit to teams on deal
  • Carried interest previously based on total fund performance

BC Partners, the private-equity firm whose investments include PetSmart Inc., is changing the way it assigns profits so that individuals will benefit more from their involvement with successful deals, people with knowledge of the matter said.

For its next fund, which the firm plans to start raising next year, BC will assign a percentage of the profit from the sale of portfolio companies, known as carried interest, to individuals directly involved in those deals, said the people, who asked not to be identified because the information is private.

The change means that unlike the firm’s current pool, which shares carried interest using a points system based on its total performance, individuals who work on more successful deals will receive more than those whose deals in the pool underperform, the people said. Executives will not receive any carried interest until investors have received all their capital back and a preferential return under the current plans, the people said.

A spokesman for London-based BC Partners declined to comment.

BC is one of a number of private-equity firms looking to modify fund terms to their benefit. CVC Capital Partners, based in London, already bases a portion of its carried interest to staff on a deal performance basis, known as ‘eat what you kill,’ while EQT Partners, based in Stockholm, will be allowed to pay its staff carried interest on a deal-by-deal basis rather than waiting until investors’ capital has been returned.

BC is targeting about 7 billion euros ($7.3 billion) for its new pool, which it will start raising in the first quarter of next year, people familiar with the matter said in August.