Net cash payouts for earned grants
Vested options are the ones an employee has fully earned under their vesting schedule. At an acquisition, these are typically exercised, with the strike price deducted from the sale proceeds, or the deal structure allows a net cash payout that achieves the same economic result without the employee needing to find cash upfront. At an IPO, vested options can usually be exercised before or after listing, subject to the lock-up period on any resulting shares.
Treatment of unearned grants at exit
| Scenario | Typical outcome |
|---|---|
| No acceleration clause | Unvested options are cancelled or continue vesting under acquirer's plan |
| Single-trigger acceleration | Unvested options vest immediately upon the sale itself |
| Double-trigger acceleration | Unvested options vest only if employment ends without cause after the sale |
| Acquirer rollover | Unvested options are converted into equivalent unvested awards in the acquiring company |
Double-trigger acceleration is common for senior employees and is generally seen as more balanced than single-trigger, since it protects the employee from an involuntary exit after a sale while still giving the acquirer a reasonable path to retain and re-incentivize the team. See stock options for the mechanics.
Scenario based payout for option holders
An employee has 20,000 options with a EUR 2.00 strike price, of which 12,500 are vested and 7,500 are unvested at the time of an acquisition valuing shares at EUR 6.00 each. Their vested options are cashed out for (EUR 6.00 - EUR 2.00) x 12,500 = EUR 50,000. If their agreement includes double-trigger acceleration and they are let go within 6 months of the deal, the remaining 7,500 options also vest and pay out (EUR 6.00 - EUR 2.00) x 7,500 = EUR 30,000, for a total of EUR 80,000 before tax, the kind of number that makes understanding stock option tax worthwhile well before a deal closes.
Planning for tax liabilities at company exit
Exercising options and receiving exit proceeds usually triggers a taxable event, and the rules differ significantly by country and by the type of option scheme used, such as the UK's EMI scheme or France's BSPCE. Employees should get country-specific advice well before a signed deal closes, since some tax reliefs depend on decisions made earlier, such as exercising options while still employed.
Equity.me does not provide tax advice. Employees should consult a qualified adviser in their country of residence about the tax impact of an exit before signing anything.
What employees want to know before a deal closes
- Do all unvested options get cancelled at an exit?
- Not always. It depends on the plan rules and deal terms; many deals include some form of acceleration or a rollover into the acquirer's equity plan.
- Is there always a tax bill when options pay out at exit?
- In most countries yes, though the amount, timing, and available reliefs vary significantly depending on the option scheme and country of residence.
- What is the difference between single and double trigger acceleration?
- Single trigger vests options immediately on the sale; double trigger requires both the sale and a subsequent qualifying termination before options vest.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.