“PE firms also want to ensure that the interests of portfolio company managers and of limited partners are aligned. For example, they frequently tie manager compensation to firm performance and include tag-along, drag-along clauses to give management a stake in the firm under certain trigger events.”
According to qBank, the statement above is correct but my understanding of tag-along, drag-along clauses was of an option for management also to sell their shares in the event of a purchase of the firm by a third party: “Any time an acquirer acquirers control of the company, they must extend the acquisition offer to all shareholders, including the firm management.”
Clauses give management a stake in the firm under certain trigger events sound more like ratchets?