The equity share capital in a new company, Newco, issued to the managers in a private equity transaction.

Sweet equity provides the incentive for the management team to deliver a positive return on the private equity investor's ordinary shares. The price to be paid on subscription of the management team's sweet equity will generally set the amount the investor must subscribe for equity (or ordinary) shares. The balance of the investor's investment will be made by way of preference shares and/or loan notes, possible alongside third-party debt finance.