Prepare for Changes at Your Company

There’s a lot to think about when your company is going through a merger or acquisition (“the deal”), especially when it comes to your equity awards. Not sure where to start? Here are five topics you may want to discuss with your Financial Advisor: 

1. Review Your Equity Awards

First, take a look at the official company communications about the deal to understand how it may impact your equity awards. While there’s no hard-and-fast rule, the terms of the deal may mean your company shares are paid out in cash or converted into shares of the acquiring company—or handled another way. Whatever the case, staying on top of any upcoming changes to your equity awards is key.

The timing of the deal, and any potential changes to that timeline, is another important piece to be aware of. Again, this information will be communicated by your company, so keep an eye out for any emails or education sessions on the topic. If the timeline of the deal is moved up or pushed out, that could affect how and when you may be able to access your equity awards, especially if you are going to need any proceeds from your awards during the deal’s timeline.

To prepare for potential changes coming your way, you may want to review your stock plan account to familiarize yourself with the status of your equity awards, including the value of your unvested or vested stock options or restricted stock units, the market price, and any applicable vesting periods or other restrictions. 

2. Explore Your Election Options

Understanding how your equity awards will be treated because of the deal and the choices available to you is important. Consider modeling different possible scenarios for your equity awards, so you can see how each path could impact your overall financial picture.

If you have the choice to cash out your stock options or swap them for new stock options, you’ll want to compare the opportunity costs: What happens if you take a cash payout now versus holding on to the new company stock? Your Financial Advisor can help you model the different scenarios, including potential tax implications, to help you assess the pros and cons of each choice.

3. Figure Out the Tax Implications

Don’t forget about taxes when you’re doing your modeling! For example, if you have delivered shares (which have vested or been transferred to you), you will likely owe income tax. Then, if you decide to sell those shares, you may owe taxes again. If you choose to sell stock, the amount and timing could impact the taxes you owe. Working with your tax professional, you and your Financial Advisor can model and discuss tax-efficient strategies. 

4. Review Your Financial Goals

A liquidity event resulting from a M&A transaction can have a significant impact on your overall financial picture. Before you make any big moves, take some time to assess your current financial situation—how much you have in cash and debt—and evaluate your near- and long-term goals. Having a holistic view of how your election choice may impact your overall financial picture can help you make a more informed decision when the time comes.

5. Take Action and Plan for the Future

You can now confidently take charge of your financial future and start planning for what comes next. A Morgan Stanley Financial Advisor who is experienced in equity compensation can help you evaluate your choices and build a holistic plan that helps you achieve your financial goals.