What happens to employee stock options when a company is sold?
The answer depends on the terms of the company’s stock option plan and the deal. Generally, in stock mergers, the acquiror replaces target company options with acquiror stock options with the same aggregate exercise price and vesting restrictions, using the exchange ratio that governs the merger. In cash transactions, options may be cashed out. Some stock options plans provide for acceleration of vesting on change of control, either automatically or following a termination of employment.
