TRENDS
& ISSUES
Team Lift-Outs: Compensation
to Entice and Integrate Revenue
Producers
AUTHOR
A “lift-out” is often used to describe the hiring of a group of
individuals from the same company who have worked well with each
other and can make an immediate and long-term contribution. A
successful lift-out can create financial gain or provide competitive
advantage such as replacing or crowding out a competitor. It can
help expand the bank’s geographic markets or solidify its existing
footprint.
Lift-outs, however, are not without risk. Management that becomes
too enamored with a team can overlook essential steps required to
determine whether it would be accretive. Inadequate due diligence
or simply “paying up” on compensation without having a reasonable
understanding of the expected results can cause a myriad of issues.
In order to mitigate the risk, bankers should follow a standardized process, as outlined
below:
Laura Hay
Managing Director
Stages of a Successful Lift-Out
Initial Conversation
Bank and team leader
discuss potential
market opportunities
and competitive
advantages.
Due Diligence
Team leader gauges
interest of other
members, develops
market projections
and business plan for
the bank’s review.
Both sides investigate
reputation, culture,
resources, and
viability of a union.
As published on BankDirector.com
August 2016
Team Transfer
Team joins bank and
transfers client
relationships in
accordance with any
contractual
agreements. The bank
plans for and
announces the
acquisition of the team
internally and
externally.
Cultural Integration
The team, which is
now on the bank’s
operational platform,
becomes fully
integrated and
establishes
relationships with
other groups within
the bank.
The compensation structure for the lift-out team should also support the four stages:
During the Initial Conversation stage, discuss high-level compensation expectations.
Often, these conversations provide insight into the team’s current compensation levels and
programs. It can help the bank determine whether the team can easily fit into the current
compensation structure or whether additional compensation is required to entice the team
to come onboard. If additional compensation is required, it is important to determine (i) how
much?, (ii) in what form?, (iii) for how long?, and (iv) whether it will create any internal
equity or pay compression issues for existing talent.
During the Due Diligence stage, the bank must determine compensation levels that
are commensurate with the economic value of the lift-out. Understanding the amount
and the timing of each team member’s individual production is essential. It can also help the
bank make the determination about which team members are essential and truly accretive.
Determining the expected production streams can help determine who needs a
compensation package outside of the current structure and who within the team could
readily be integrated into the current structure.
It may be helpful to create a program where the additional pay phases out over a period of
time or is only paid if the individual (or team) meets the production expectations agreed on
at the time of the lift-out. For example:


Special equity awards could vest based on the achievement certain levels of production
within a specified period of time or could cliff vest (e.g., after 3 years) providing time to
assess talent prior to vesting
Special bonuses could be paid if certain levels of production are achieved.
During the Team Transfer stage, care should be taken to address any internal equity
concerns and ensure that non-competition/non-solicitation commitments are upheld.
Possible rationales for accepting differing levels of compensation among like positions
could include the limited nature or timing of the differences or the financial impact of the
additional revenue stream.
Revenue producing roles are increasingly subject to non-competition and non-solicitation
agreements. To avoid litigation, it is extremely important to ask lift-out team members for
any documents that involve their interaction with clients or the solicitation of former
employees. The bank should review these and seek the advice of legal counsel.
During the Cultural Integration Stage, the bank should assess whether pay
differences should (a) remain given the structure and/or economics of the team or (b)
be discontinued.
Team Lift-Outs: Compensation to Entice and Integrate Revenue Producers
2
Maintaining pay differences makes sense if the team continues to outperform or if the group
is highly sought-after by other institutions. However, if the results are commensurate with
those in similar roles, it may become increasingly divisive to maintain special programs.
Integration into the existing pay programs is a more natural choice.
In summary, team lift-outs provide a way for banks to accelerate growth by acquiring, rather
than developing, proven revenue producers. Thoughtful management of compensation
during the stages of a lift-out ensures that individuals are enticed to move and are
motivated to produce for the bank.
About the Author
Laura Hay is a managing director in Pearl Meyer’s Charlotte Office. She has extensive
experience specializing in executive and director compensation and is frequently retained to
evaluate the appropriateness of compensation programs. She advises a number of public
financial institutions as well as government sponsored enterprises and private banks,
including private equity and majority-shareholder owned institutions.
About Pearl Meyer
Pearl Meyer is the leading advisor to boards and senior management on the alignment of
executive compensation with business and leadership strategy, making pay programs a
powerful catalyst for value creation and competitive advantage. Pearl Meyer’s global clients
stand at the forefront of their industries and range from emerging high-growth, not-for-profit,
and private companies to the Fortune 500 and FTSE 350. The firm has offices in New York,
Atlanta, Boston, Charlotte, Chicago, Houston, London, Los Angeles, and San Francisco.
Team Lift-Outs: Compensation to Entice and Integrate Revenue Producers
3
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