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

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

Will money ever make it to your hands?

In our last blog post, we began introducing the various aspects used to understand the question, “What happens to my stock options if a merger or acquisition occurs?” In part one, we discussed stock option plans, individual grant agreements and vested options. Today, in part two, we delve into unvested options, acceleration events and the mechanics of acceleration.

Unvested options: Unvested options are the concern of most employees working through a merger or acquisition. According to MyStockOptions.com, “Some plans provide latitude to your company’s board of directors (or its designated committee) to determine the specifics of any acceleration of unvested options. The agreements may provide the board with absolute discretion as to whether to accelerate the vesting at all. Alternatively, the stock plan documents may require acceleration.” But what is acceleration, you may ask? Acceleration events are provisions included within your plan that can accelerate the final outcomes of a merger or acquisition.

Acceleration events: The following are some of the common events that could trigger acceleration.

  • Hostile takeover – Over 50% of all board members are replaced
  • 40% or more of all company stock is purchased
  • An approved liquidation or dissolution occurrence
  • An approved sale of company assets

Acceleration mechanics: If acceleration occurs then the result and procedures will vary greatly. However, the acceleration typically occurs in one of two ways:

  • Partial acceleration
  • Immediate vesting of all remaining unvested options

When going through a merger or acquisition, there are bound to be a multitude of questions concerning stock options and their many aspects. Be sure to check back next week for another installation in the series as we dive deeper into the subject and introduce deal factors that could affect your options during a potential merger or acquisition.

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: V1ctor.

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