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unvested options Archives - Help with mergers & acquisitions, raising capital, creating stock options and other equity plans

Posts Tagged ‘unvested options’

Acquisition: What Happens After a Shift of Power? Part 3

Is your money on the line?

We have recently introduced a few of the procedures for moving forward with stock options in a merger or acquisition. In parts one and two, we discussed vested and unvested options, acceleration mechanics and events and also conveyed the importance of understanding your stock option plan or individual grant agreement.

In part three, we will answer your questions by introducing how the terms of your merger or acquisition could affect the future of your stock options.  While your individual documents should grant you some insight, the future of your stock options depends heavily on the terms of your company’s unique merger or acquisition.

Vested options: There are multiple things that could happen to vested options and the final outcomes will occur according to how the merger or acquisition is structured.  Vested options could:

  • Remain unchanged (company must remain intact)
  • Rolled over into options for the buyer
  • Turned into cash payment upon cancelation

According to MyStockOptions.com, “Sometimes companies provide a choice to employees: Vested options are either cashed out or swapped for vested options in the acquirer. Depending on the structure of the acquisition, you may have to exercise your options before the deal closes. Your stock plan may provide the board the power to force an exercise. If so, you would receive whatever your company’s shareholders receive (e.g., cash, acquirer’s stock, or a combination) in exchange for their stock.”

Unvested options: As we discussed in our previous posts, the future of unvested options in a merger or acquisition is often uncertain. The purchasing company could simply make an exchange of the company’s options for their own, leaving things relatively unchanged or a new grant could be offered. It is also common for the acquiring company to grant stock options under their traditional plan; these typically resemble the packages for new hires. It is also possible, but unlikely, for options to be cashed out.

There are still multiple aspects of a merger or acquisition to understand before being able to fully comprehend the future of your stock options. Check back in a few days for part four. We will dive deeper into the topics of deal factors, valuation and option conversion.

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.

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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