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Acquisition: What Happens After a Shift of Power?

Acquisition: What Happens After a Shift of Power?

What will you get in liquidation?

Changes occur in corporate America every day and as an employee these changes can be intimidating, especially when they are related to the future of stock options during a merger or acquisition. In this multi-post blog series we will attempt to answer the age old question of, “What happens to my stock options?” In part one, we will introduce the first steps in understanding how stock options can be affected in a merger or acquisition.

Know the terms of your options: When you are given an initial plan for your stock options, you are basically given all the information you could possibly need for reference. Your individual grant agreement and your individual stock option plan will be the two resources you turn to for the details needed to move forward after a merger or acquisition occurs. In preparing for a change in power, we suggest familiarizing yourself with the sections commonly known as “qualifying events” or “changes in power.” These two sections will house the best insights into the company’s standards for stock option procedures during a job event of this magnitude.

Vested options: The future of both your vested and unvested options depends solely on the terms listed in your agreements and the procedures of your company’s merger or acquisition.

According to MyStockOptions.com, “When your company (the “Target”) merges into the buyer under state law, which is the usual acquisition form, it inherits the Target’s contractual obligations. Those obligations include vested options. Therefore, your vested options should remain intact in a merger/reorganization scenario.” Always be sure to refer back to your agreements for further details.

There could be opportunity to receive some sort of compensation in exchange for your vested options if an asset acquisition occurs and the company is eventually liquefied. Check in with your management to find out what your company has received and what your potentials gains could be.

Be sure to check back soon for more information concerning stock options and their future after a change in power. In part two, we will delve into the details of unvested options, accelerated events and the mechanics of acceleration.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today!

Photo Credit: VictorCamilo

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