M&A: Basics

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My Company's Being Acquired: What Happens To My Stock Options? (Part 1)

Richard Lintermans
What happens depends on the terms of your option grants, the terms of the M&A deal, and the valuation of your company's stock.

The Acquisition: All's Well That Ends Well?

I was hired by Company X and received equity pay that might have been worth between $300,000 and $400,000 at our IPO -- not bad, except that we never went public.

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FAQs (Jump to articles)

I see many different terms used to describe corporate transactions. What is the difference between a merger, an acquisition, and a divestiture?

It's important to know the difference, as this can trigger changes in your outstanding stock grants. An acquisition of a company occurs when...

How is the method for treating stock options in a merger or acquisition determined?

Many factors can affect what happens to your outstanding stock grants. The senior officers of the two companies in the transaction (or their boards) and their attorneys negotiate how options will be handled according to...

What is a "lockup"?

Lockups are contractual restraints on...

How might the terms of my company's stock plan or my grant agreement affect the treatment of my options and restricted stock if my company were acquired?

In many plans unvested options accelerate in some way...

What affects the willingness of a buyer to cash out or convert the seller's options other than the deal's tax structure?

An acquirer may be more likely to seek a cashout of your stock options (or restricted stock) upon the consummation of an acquisition if...

How can I find out how much I will make from an acquisition of my company?

Unless you are among the inner circle of management...

If my company is bought for stock of the acquirer, will I be able to purchase the same number of shares in the buyer as I am allowed to with my current options and restricted stock?

Not necessarily. If an acquirer is using its stock to pay for shares of your company, then the purchase will be denominated in stock according to one of several methods...

What happens if our company's stock price or the acquirer's stock price fluctuates before the acquisition is completed?

The result depends on the terms of the acquisition agreement. If the purchase price...

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NEW! What is the tax treatment of my restricted stock in an acquisition?

This depends on how restricted stock (or restricted stock units) is treated in the acquisition. For example, if the vesting is accelerated, then you will be...

One year after the acquisition, under the deal's terms I was granted additional shares in an earnout for my company's meeting of performance targets. How are these additional shares taxed?

This structure is more common in acquisitions of private companies or small public companies than in acquisitions of big public companies. Since the grant of the additional shares is tied to performance, the value is taxed as...

In an acquisition, what happens to money that has been waiting to purchase shares in my ESPP?

Check your company's plan for any specific provisions, including its flexibility to amend...

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