When your company is acquired, what happens to your unvested equity is generally governed by the acceleration terms already sitting in your grant documents — and your retirement accounts and health coverage can change too, sometimes before the deal closes. The acquisition announcement is a sentence; the fine print runs to thousands of pages, and most of it is decided weeks before you hear about it. Here's what many people look at in the first 30 days. The specifics depend on your situation, and these rules and figures can change.
What happens to your equity, 401(k), and health coverage?
1. What happens to your unvested equity?
This is generally governed by two terms in your grant documents, and your specific agreement may differ:
- Single-trigger acceleration: Unvested shares vest automatically on the closing date. Rare; favorable to you.
- Double-trigger acceleration: Unvested shares vest only if (a) the acquisition closes AND (b) you are terminated within a defined window afterward (often 12 months). This is the more common structure.
If neither applies, unvested shares typically convert to the acquirer's equity on a similar vesting schedule — but the new schedule may have different terms.
2. What happens to vested but unexercised options?
For ISOs and NQSOs that have vested but not been exercised, the deal documents will usually specify one of: cash-out at the deal price minus strike, conversion to acquirer options at an equivalent value, or a forced exercise window. It often helps to read the disclosure carefully, since the treatment varies by deal.
3. What happens to your 401(k)?
Two paths are common: the acquirer merges your plan into theirs (your balance moves; investment options change), or the acquirer terminates your plan and gives you 60–90 days to roll over. The IRS generally treats a direct rollover to the acquirer's plan or to an IRA as tax-free, while a cash-out is generally treated as a taxable distribution. Your plan's specific terms and timeline may differ.
4. What happens to health coverage?
Most acquirers continue your current health plan through the end of the calendar year, then transition you to their plan at the next open enrollment. Things many people watch for: a deductible reset mid-year (some transitions credit your prior deductible, some don't), and network changes that affect your existing doctors. The specifics depend on the plans involved.
When does an acquisition work in your favor?
- You have double-trigger acceleration and are part of the redundancy round — some people receive both severance AND accelerated equity.
- The deal price is above the strike price on your options and you've held long enough for favorable tax treatment.
- The acquirer's benefits package is materially better (higher 401(k) match, richer health plan, larger PTO accrual).
- A retention bonus is offered to keep you through integration — these are common at the manager-and-above level.
When should you be cautious?
- You have unvested equity and no acceleration clauses — the acquirer can re-vest you on their own schedule, which is sometimes worse.
- The acquirer is a public company and your private-company shares are converting to public shares — there may be a lockup period (often 6 months) before you can sell.
- The acquirer terminates your 401(k) plan and a rollover is missed within the window — the IRS generally treats a forced distribution as something that can trigger taxes and penalties. Your plan's window may differ.
What should you do in the first 30 days?
- Find your grant documents and locate the acceleration language.
- Confirm your vesting status (vested vs unvested) as of the announcement date.
- Document your current 401(k) balance and contribution rate.
- Note the year-to-date deductible and out-of-pocket totals on your current health plan.
- Identify the integration point of contact in HR.
- Many people who are senior or hold significant equity consult an equity-comp CPA before the closing date.
What should you ask HR or the integration team?
- What is the exact closing date, and what changes that day vs at end of year?
- Will my vested equity be cashed out, exchanged for acquirer shares, or rolled into new options?
- Will my 401(k) plan be merged or terminated, and what's the timeline?
- Will my deductible-year-to-date carry over, or does it reset?
- Is there a retention bonus offered for my role?
Under the federal securities laws, the SEC generally requires public acquirers to file detailed disclosures, so the deal terms that affect your equity are often a matter of public record — see SEC investor education on mergers and acquisitions (affiliate link — OffbookHR may earn a commission if you buy through this link. It does not affect ranking.). Because the IRS rules and figures around 401(k) rollovers can change, many people confirm the current treatment at the source — the IRS explains rollover treatment in Rollovers of Retirement Plan and IRA Distributions (affiliate link — OffbookHR may earn a commission if you buy through this link. It does not affect ranking.).