The ratio between the effective price paid by management and that paid by the investing institution for their respective holdings in the NewCo in an MBO or MBI.
Envy ratio = (IC/I%):(MC/M%), where:
- IC = investors amount to be invested in NewCo
- I% = investors’ ownership in NewCo.
- MC = management amount to be invested in NewCo
- M% = management percentage ownership of NewCo (ie percentage of ordinary shares owned)
Example: If the VC invests £5m for 60% equity and the management invests £0.2m for 40% ordinary shares the envy ratio is: