Impact of acquisition on shareholders


3

SCENARIO

I'm an early employee in a startup and 100% vested. I've been in the company long enough to start thinking about my next career step (MBA maybe), but I do wish it the best of success and I'll be leaving on good terms. Its likely that the startup will get acquired in the next 1-2 years.

QUESTIONS

  1. If the startup gets acquired, what are the implications to the shares that I own and their value?
  2. Is there any possibility of some acquisition stipulation that would discriminate between current employees and ex-employees?

In other words, should I try to stick with the startup until we get acquired? One of the main reasons we join startups is for an eventual payback, right? I don't want to lose out on that after all the time/work I've put in.

Thanks folks!
hungryhumble

Acquisition Shares

asked Sep 6 '11 at 11:51
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Hungryhumble
16 points

1 Answer


1

It depends.

Ask a lawyer about the legal side of things, since your specific contract and jurisdiction can make a significant difference.

Can the owners of the current company take some actions which leave you out to dry? Yes. Depending on who is doing the buying and other related circumstances, it is possible for the owners of a company to obtain a deal which allows them to cash out their own stocks, without guaranteeing that anyone else will have the same kind of deal. Worst case scenario, you'll have to find your own buyer for your stocks at your own price.

Is it likely to happen? No. In some jurisdictions, it may even be illegal. Most likely you'll receive the same compensation that any other stock-holder at your level is receiving - you'll be able to cash out in the same manner as all the other stock holders who hold your level of stock.

Buyout deals can, however, include additional benefits for existing employees, aimed at convincing them to stay on as employees after the buyout. These include high salaries, fancy offices, nicer titles, and possible bonuses or additional stock options. You'll certainly miss out on those

answered Sep 6 '11 at 13:25
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Blueberryfields
426 points
  • Thanks blueberryfields. That really helps and also confirms my reasons to be concerned. Really appreciate the response. – Hungryhumble 8 years ago

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Acquisition Shares