Your source for data-driven advice on investing and personal finance. See how Wealthfront can help you reach your financial goals. The most popular question we received is what does the acquisition mean for the employees financially. IPOs tend to get all the headlines, but in many cases technology companies are acquired.

This post will walk through the economics of an acquisition and how it affects all the parties involved. The proposed RSUs are only being granted to founders and employees. The RSUs will not necessarily be allocated according to the current relative ownership of the employees.

Detailed information about allocation is not available at this time. According to our startup compensation tool , a senior software engineer who joined a company when it had between 21 and 50 employees would, on average, receive stock options that represent 0. In addition the employee will receive a portion of the RSUs to be granted as a retention incentive.

Please keep in mind this is not a normal amount for an engineer who joins at this stage to earn in an acquisition. You must also keep in mind the values I calculated are what could be earned through a four-year vesting period. Vesting schedules typically do not change in a successful company acquisition although they often can in an acqui-hire scenario. Acquired employees can rely on their original vesting schedule to determine how much they have earned at every point of their tenure, even post acquisition.

This means that employees must continue to work for the company in order to realize the full value of their equity compensation. Just as is the case with IPOs, shares received in acquisitions are typically subject to a six-month lockup.

However in the case of an acquisition the minimum lockup period is mandated by federal securities laws. There can be a longer lockup, which is purely determined by an agreement between the buyer and seller. Some lockups even extend to one year. The length of the lockup is a heavily negotiated term to prevent a huge influx of new shares hitting the market before the buyer has a chance to convince its current investors the deal makes sense.

Lockups can be eliminated in two ways, both instigated by the buyer: Of course the seller has a big incentive to limit the length of a lockup, but in fact the sellers can benefit from a lockup if it gives the buyer a better opportunity to convince other investors why the deal is compelling. We hope this analysis provides some insight into how large acquisitions are structured and the potential financial impact on the employees. Most employees of a young company have significant vesting ahead of them, something that tends to go underreported when an eye-popping price is put on an acquisition.

Of course that needs to be weighed against the significant amount of value that remains to be vested when one considers whether to continue with the acquired entity. Acquisitions as large as WhatsApp are exceptional, but acquisitions as a whole are not uncommon ways for employees to receive value from their equity.

Hopefully, thinking through the numbers behind this acquisition can help you assess what an acquisition might mean for your compensation if you work for a hypergrowth technology company. Andy Rachleff is Wealthfront's co-founder, President and Chief Executive Officer.

How do stock options work when your company gets bought? - Ars Technica OpenForum

He serves as a member of the board of trustees and vice chairman of the endowment investment committee for University of Pennsylvania and as a member of the faculty at Stanford Graduate School of Business, where he teaches courses on technology entrepreneurship.

Prior to Wealthfront, Andy co-founded and was general partner of Benchmark Capital, where he was responsible for investing in a number of successful companies including Equinix, Juniper Networks, and Opsware.

Andy earned his BS from University of Pennsylvania and his MBA from Stanford Graduate School of Business. Vanguard versus Wealthfront — how do the two compare? In this post, we compare the two services and explain the relative advantages of Wealthfront.

Advisory: Stock Options in Merger & Acquisition Transactions

Path helps you prepare for your financial future, every step of the way. Please read important legal disclosures about this blog. This blog is powered by Wealthfront.

The information contained in this blog is provided for general informational purposes, and should not be construed as investment advice.

These contributors may include Wealthfront employees, other financial advisors, third-party authors who are paid a fee by Wealthfront, or other parties.

Unless otherwise noted, the content of such posts does not necessarily represent the actual views or opinions of Wealthfront or any of its officers, directors, or employees.

Ask HN: The startup I work for, got acquired. What will I get? | Hacker News

Wealthfront Knowledge Center Your source for data-driven advice on investing and personal finance. Tags acquisitions , Andy Rachleff , career planning , Facebook , IPO lockup , Silicon Valley. About the author Andy Rachleff is Wealthfront's co-founder, President and Chief Executive Officer. View all posts by Andy Rachleff Questions?

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