Irvine's Sunstone Management Announces New Chief Compliance Officer
Stanford Angels & Entrepreneurs Online Pitch Night 2/7/24

Stock Option Strategies in M&A: What You Need to Know

Thanks to OCSC Platinum Sponsor Withum for this valuable information about Business Planning:

Merger and Acquisition Effects on Stock Options

WithumDue to the magnitude of merger and acquisition (M&A) activity in both the private and public markets, it is important for founders, executives, and employees to all consider the effect a consolidation could have on stock options.

In some cases, treatment may be found in the individual’s grant package in a section regarding change in control, or qualifying events. However, there may be a few general outcomes for different types of equity depending on the structure of the transaction.

  EXERCISED SHARE UNEXERCISED VESTED
OPTIONS
UNEXERCISED UNVESTED
OPTIONS
CASH-OUT An acquirer usually pays cash consideration for stock in the acquired. An acquirer may pay cash
consideration net of the strike
price for vested options in the
acquired. This consideration
may be subject to holdbacks.
An acquirer may pay cash
consideration net of the strike
price for unvested options in
the acquired. This consideration
may be subject to restrictions.
ASSUMPTION, OR SUBSTITUTION An acquirer may pay equity consideration in the acquirer for stock in the market. The acquirer may assume
or substitute the acquirer’s
equity net of the strike price for
vested options in the acquired.
This substitute equity may be
subject to holdbacks.
The acquirer may assume
or substitute the acquirer’s
equity net of the strike price
for unvested options in the
acquired. This substitute equity
may be subject to restrictions.
ACCELERATION Should not result in any change. The acquirer may allow the
chance to exercise options
during or after the M&A deal
closes.
The acquirer may accelerate
the vesting of options and allow
the chance to exercise options
during or after the M&A deal
closes.
CANCELLATION Should not result in any change. An acquirer may cancel
underwater vested options in
the acquired.
An acquirer may cancel
unvested options in the
acquired whether underwater
or not.

 

Although it’s important to be aware of some of the possible outcomes of stock options in a business combination, or a potential exit like an IPO, the best time to plan is when an individual first joins a company or is granted an equity award.

Read this article at withum.com...

Contact OCSC Platinum Sponsor Withum to learn more about their services. For Technology and Emerging Growth Services contact Allen Goh, Technology & Emerging Growth Services West Coast Team Leader - [email protected], Matt Greco, Marketing – [email protected], or Brenna Liana, Marketing - [email protected] and learn more at https://www.withum.com/industries/technology-services/ For Life Sciences companies, contact Taryn Bostjancic, Life Sciences Practice Leader - [email protected] and learn more at https://www.withum.com/industries/life-sciences/

Want to share your advice for startup entrepreneurs?  Submit a Guest Post here.

WHAT’S YOUR NEWS? - Submit your company news, deals, opinions, or job listings here for FREE PUBLICITY.

See the Directory of OC StartupsJoin the OCSC to list your company, too!

AND - Subscribe for FREE OC Startup News here!

OR, WHAT DO YOU THINK?  LEAVE A COMMENT BELOW!

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)