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Usually, the senior officers of the two companies in the transaction and their attorneys negotiate how stock options, restricted stock, and other equity awards will be handled as they negotiate the other terms of the sale or merger agreement.
The most significant factors in making this determination typically are:
- the terms of the stock option plan of the target company, including how much discretion the board is given and its definition of change in control
- the tax consequences to the plan participants
- the tax consequences to the target and the acquirer
- the financial accounting goals for the transaction
- the willingness of the acquirer to preserve equity participation by employees of the target company
- the value of your company's stock compared to that of the acquirer's, as this affects the exchange ratio
- any special provisions in individual grant, employment, or severance agreements
For details on the alternative ways your stock options and restricted stock can be treated in an acquisition/merger, see the FAQs in M&A: Impact. |
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