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Acquisition: What Happens After a Shift of Power? Part 5

Acquisition: What Happens After a Shift of Power? Part 5

A company merger or acquisition can be an intimidating process to endure as an employee. In parts one, two, three and four of this series we introduced various aspects of these events that are essential for understanding the future of your stock options.

How will your stock options exchange?

In our fifth installation, we will discuss the burning question most employees can’t wait to ask, “What will I get for my stock options?”  There are four common exchanges that could occur during a merge or acquisition. Today, we will delve deeper into the first two of the following four options throughout this post. In exchange for your stock options, you may receive:

  • Cash
  • Buyer options
  • Cash and option combination
  • Buyer stock

Cash: Cash deals are fairly straight forward in nature. Cash exchanges for stock for example, require the exercise of vested options prior to a sale. The shares are then sold in the terms of the acquisition. Cash for options however, does not require exercise prior to a sale. You will likely receive cash for your cancelled options that will be considered W-2 income.

Buyer Options: A popular non-taxable exchange is one exchanging your stock options for buyer options. According to mystockoptions.com, “The number of options you receive is based on an exchange similar to a stock swap, with the exercise price adjusted. However, an exchange of ISOs for NQSOs, or for ISOs with more favorable terms or a larger aggregate spread, might be a modification that disqualifies them for ISO treatment or requires an adjustment to the exercise price (to maintain ISO status).”

Be sure to check back in a few days for the sixth and final installation of our acquisition series. We will uncover essential information for understanding the welfare of your stock options and will introduce the cash and option combination as well as buyer stock exchanges. As always, if you or anyone you know is amidst a merger or acquisition and is looking for assistance, we urge you to contact us today!

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: KHRAWLINGS

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