What it means
Equity awards normally vest over time, often four years with a one year cliff, so an employee who leaves early forfeits whatever has not yet vested. Acceleration overrides that clock for a defined reason.
The classic trigger is a change of control. Single trigger acceleration vests the award the moment the company is sold, while double trigger acceleration requires both the sale and the employee losing their job or being materially demoted within a set window afterwards.
Buyers usually dislike single trigger provisions, because they can leave a newly acquired team fully vested and free to walk on day one. Double trigger is the market norm precisely because it protects the employee from being pushed out while keeping a real incentive to stay.
There is a direct financial consequence for the sellers. Accelerated awards increase the number of shares in issue at completion, which dilutes the price per share the existing owners receive, so acceleration terms are effectively part of the purchase price negotiation.
Accounting and tax both bite as well. Under share-based payment rules the remaining unrecognised expense is charged immediately on acceleration, and the employee typically faces an income tax charge at the point of vesting or exercise rather than years later.
In practice
Real-world examples.
Example
A founder negotiates double trigger acceleration into her employment contract before a Series B. Two years later the company is acquired, the buyer restructures her role six months afterwards, and her remaining 250,000 shares vest in full.
Example
A software company's sale nearly collapses when the buyer discovers that four senior engineers hold single trigger acceleration. The deal completes only after those engineers agree to swap it for retention bonuses paid over two years.
Example
An employee made redundant eleven months into a four year grant receives nothing, because the plan rules only accelerate on a change of control. Her 100,000 options lapse entirely, since she has not yet reached the one year cliff.
Formula
Calculation
Vested units = total award x (months of service completed / total vesting months)
Partial acceleration = total award x (acceleration months / total vesting months)
An engineer is granted 48,000 options vesting monthly over 48 months with a strike price of $1.00. After 18 months of service she has vested 48,000 x (18 / 48) = 18,000 options, leaving 48,000 - 18,000 = 30,000 unvested.
The company is then acquired at $5.00 per share. With full single trigger acceleration all 30,000 unvested options vest as well, so her total gain is 48,000 x ($5.00 - $1.00) = $192,000.
With the more common twelve month partial acceleration she instead vests an extra 48,000 x (12 / 48) = 12,000 options, taking her total to 18,000 + 12,000 = 30,000 vested options and a gain of 30,000 x $4.00 = $120,000. The remaining 18,000 options are either cancelled or rolled into the buyer's own scheme.Case study
Seen in the real world.
The following is an illustrative and entirely fictional example. Verity Health Systems, an invented clinical software company, agreed a $60,000,000 sale with 12,000,000 shares in issue, implying $5.00 a share. The option pool contained 1,500,000 unvested options carrying single trigger acceleration that nobody had flagged while preparing for the sale.
When the buyer's advisers ran the fully diluted numbers, the share count at completion rose to 12,000,000 + 1,500,000 = 13,500,000 and the price per share fell to $60,000,000 / 13,500,000 = $4.44. The founders, holding 6,000,000 shares between them, saw their proceeds drop from $30,000,000 to about $26,670,000.
In the fictional negotiation that followed, the buyer agreed to raise the headline price to $67,500,000, which restored $5.00 a share and made the founders whole, but only in exchange for a larger escrow and a longer earn-out. The illustrative lesson is that acceleration terms written casually years earlier turn into real money at the moment of sale.
Watch out
Common mistakes.
- Agreeing single trigger acceleration across a whole team because it seems generous, then finding it reduces what the shareholders receive in a sale.
- Assuming redundancy automatically accelerates an award, when most plans only accelerate on a change of control.
- Forgetting the tax charge that lands when options vest or are exercised, leaving the holder with a bill and no cash to pay it.
Questions
People also ask.
What is the difference between single and double trigger acceleration?
Single trigger vests on the sale alone, while double trigger needs the sale plus a qualifying termination or demotion afterwards.
Does acceleration cost the company anything in the accounts?
Yes, the remaining share-based payment expense is recognised immediately, which can produce a large one-off charge in the period of the event.
Is partial acceleration common?
Very, and twelve months of additional vesting on a double trigger is one of the most frequently agreed compromises.
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