Envy ratio

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:

Envy ratio=(5/60)/(0.2/40)=16.7