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What is Double-Trigger Acceleration? 

Double-trigger acceleration is a clause in an employee's stock option or restricted stock agreement that accelerates the vesting schedule of their equity upon the occurrence of two specific events. Typically, these events are a change in company ownership (such as an acquisition) and the subsequent termination of the employee without cause.

Advantages: 

Double-trigger acceleration protects employees by ensuring they benefit from the equity they have earned if they lose their job due to a company acquisition. It also incentivizes employees to remain with the company during transitions, providing stability.

Disadvantages: 

For acquiring companies, double-trigger acceleration can increase costs and complexity during mergers or acquisitions. It might also create retention issues post-acquisition if many employees choose to leave once their equity vests.

Impact on Mergers and Acquisitions: 

Double-trigger acceleration clauses can influence the dynamics of mergers and acquisitions. Acquiring companies need to consider the potential costs associated with accelerated vesting. These clauses can also impact employee retention and morale, as employees might feel more secure and motivated knowing they are protected in the event of a change in control and subsequent termination. It is crucial for both parties to carefully negotiate these terms to balance protecting employee interests with maintaining financial and operational stability post-acquisition.

Real World Example: 

A notable example is the LinkedIn acquisition by Microsoft in 2016. LinkedIn's executive team had double-trigger acceleration clauses, which ensured their unvested stock options would vest if they were terminated without cause following the acquisition. This provided financial security to the executives and ensured a smooth transition during the acquisition process.

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