Stock Comp In M&A: 5 Things You Need To Know

myStockOptions.com

The editor-in-chief of myStockOptions (https://www.mystockoptions.com) explains the 5 most important things you should know about the impact of a company merger or acquisition (M&A) on your stock options, restricted stock units (RSUs), and other forms of equity compensation.

The video covers 5 topics involving stock options and restricted stock/RSUs in M&A: 

1. What determines the outcome for your grants 
2. What happens with vesting
3. What you get for your outstanding grants
4. Changes in grants that convert/roll over 
5. Taxes

As discussed in the video, what happens to your vested and unvested grants could be handled in different ways, according to the deal's terms, what the companies negotiate, and any limits in your company’s stock plan and provisions in your individual grant agreement. Depending on the terms of your individual stock grant, your unvested grants with time-based vesting may get some or all their vesting accelerated when certain conditions occur. In addition to the deal closing, with most grants a second event or trigger, such as job loss, must occur to accelerate the vesting.

The video goes on to note that if you are not getting any cash in exchange for your grants or your vested company stock, the transaction itself and treatment for your grants should be tax-free. Check to see whether any options originally granted to you as incentive stock options will retain their tax status as ISOs or will become nonqualified stock options (NQSOs). Any acceleration of vesting for restricted stock and RSUs, or the exercise of NQSOs, will usually trigger ordinary income.

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