Vesting Acceleration: Single vs. Double Trigger in M&A

Sarah spent four years building her company from a raw idea to a $30 million acquisition target. As CTO and co-founder, she owned 10% of the company after dilution. At the $30M exit price, her equity was worth $3 million. But when the deal closed and the dust settled, she walked away with exactly $900,000.

What happened? Two months after the acquisition, the acquiring company "restructured" and terminated Sarah without cause. Because her stock option agreement contained no acceleration provisions, the 70% of her shares that remained unvested ($2.1 million worth) simply vanished. The acquirer got her talent for the integration period, then cut her loose before the bulk of her equity vested. Her lawyers confirmed what she already knew: perfectly legal.

This is the hidden battlefield of M&A deals. While founders obsess over valuation and VCs negotiate liquidation preferences, vesting acceleration clauses quietly determine who actually captures value at exit. Get it wrong, and you can watch millions evaporate despite a successful acquisition.

Vesting Basics: The Foundation

Before we dive into acceleration mechanisms, you need to understand the standard vesting structure that governs most startup equity. The industry standard is a four-year vesting schedule with a one-year cliff, and this structure exists for good reason.

Here's how it works: when you receive equity as a founder or employee, you don't actually own it all immediately. Instead, you earn the right to that equity over time, typically four years. The one-year cliff means nothing vests for the first 12 months. If you leave before that anniversary, you get zero equity. After the cliff, equity typically vests monthly over the remaining 36 months.

Let's illustrate with numbers. Imagine you're granted 400,000 shares on January 1, 2024:

• January 1, 2025 (12 months): 100,000 shares vest all at once (the cliff)
• February 1, 2025 (13 months): 8,333 additional shares vest (1/48th of total)
• Each month thereafter: 8,333 shares vest until you hit month 48
• January 1, 2028 (48 months): All 400,000 shares fully vested

This structure protects investors from founders or employees who leave early, while ensuring that people who stick around for the journey get their full equity stake. But here's what most people don't think about: what happens to unvested shares when the company gets acquired?

In most acquisitions, the acquiring company doesn't want to inherit a complex cap table with vesting schedules. They want clean ownership. This creates a tension: founders and employees have unvested equity that could be worth substantial money, but the standard vesting schedule says they shouldn't get it yet. This is where acceleration clauses come into play.

Single-Trigger Acceleration: Immediate Vesting

Single-trigger acceleration means that one event, typically a change of control (acquisition), immediately accelerates the vesting of some or all unvested equity. The "trigger" is the acquisition itself, nothing more required.

This sounds straightforward, but single-trigger acceleration comes in different flavors, and the percentage that accelerates makes an enormous difference to the economics.

100% Single-Trigger Acceleration

This is the founder-friendly version. When the acquisition closes, all unvested shares immediately vest. Let's run the numbers:

With 100% single-trigger acceleration, you capture the full value of your equity stake regardless of how long you've been at the company. The acquisition itself is the only trigger needed.

Partial Single-Trigger Acceleration

More commonly, you'll see partial single-trigger acceleration, typically 25%, 50%, or 75%. Using the same example with 50% single-trigger:

You can see how the percentage matters enormously. The difference between 50% and 100% single-trigger acceleration is $600,000 in this example. Scale that to a larger acquisition or a founder with more equity, and you're talking about millions of dollars determined by a single clause.

Single-trigger acceleration benefits founders and employees who have substantial unvested equity at the time of acquisition. It ensures they capture value even if they don't continue with the acquiring company. However, as we'll see, this creates problems that make acquirers very hesitant to accept these terms.

Double-Trigger Acceleration: Two Events Required

Double-trigger acceleration requires two events to occur before unvested equity accelerates: (1) a change of control (acquisition), and (2) a qualifying termination of employment. Both triggers must fire for acceleration to occur.

The second trigger is typically defined as termination without cause or resignation for good reason within a specified time period after the acquisition, usually 12 to 24 months. This means if you're fired without cause or constructively terminated within that window, your unvested equity accelerates.

How Double-Trigger Works in Practice

Let's use the same example but with 100% double-trigger acceleration:

But here's the crucial difference: if you continue working for the acquiring company and don't get terminated, the unvested equity continues vesting on its normal schedule, or you might forfeit it if the acquirer doesn't assume the equity. The acceleration only happens if both triggers occur.

Why Acquirers Strongly Prefer Double-Trigger

From the acquirer's perspective, double-trigger acceleration solves a critical retention problem. When they're buying your company, they're usually buying your team's knowledge, relationships, and ability to execute. They need key people to stick around for at least 12 to 24 months to ensure a smooth integration.

Single-trigger acceleration creates a perverse incentive: the moment the deal closes, founders and key employees become independently wealthy and have zero financial reason to stay. With double-trigger, the acquirer retains leverage. If you want your unvested equity to accelerate, you need to either stick around or be terminated without cause.

This is why most sophisticated M&A deals include double-trigger provisions for key employees. Investors also prefer double-trigger because it reduces the risk that the deal falls apart post-close due to key employee departures.

How This Can Be Used Against Founders

Now we get to the dark side of vesting acceleration, or more accurately, the absence of acceleration. This is where founders lose millions of dollars to legal technicalities they didn't fully understand when they signed their stock option agreements.

The No-Acceleration Trap

The worst-case scenario is having no acceleration clause at all. This means that even in an acquisition, your equity continues vesting on its original schedule, and if you leave or get terminated, you forfeit all unvested shares.

Let's see how brutal this can be with real numbers:

The founder in this scenario just lost $1.8 million. The acquiring company got exactly what they wanted: the founder's expertise during the critical integration period, then a clean exit without having to pay for the unvested equity.

Here's what makes this particularly insidious: the acquirer and the VCs are often perfectly aligned on this outcome. The VCs get their return based on the $30M valuation. They don't care whether the founder gets $1.8M or $3.6M; that money comes from the same pool. If the acquirer prefers to shed the founder after integration, the VCs might actively support it to maintain a good relationship with the acquirer for future deals.

The Partial Acceleration Trap

A more subtle version of this problem occurs with partial double-trigger acceleration. Imagine the same scenario but with 25% double-trigger acceleration:

You got some acceleration, which sounds good, but you still lost $1.35 million compared to full acceleration. The partial acceleration clause made you feel protected, but when the numbers shake out, you've still been significantly disadvantaged.

The Economic Reality

These aren't hypothetical scenarios. They happen constantly in M&A deals, especially in acqui-hires and smaller acquisitions where the acquirer wants the team for 12 to 18 months but has no long-term plans for them. The acquirer gets the knowledge transfer, the VCs get their exit, and the founders get a fraction of what they thought they were getting.

The bitter truth is that without strong acceleration provisions, founders have almost no leverage post-acquisition. The acquirer can terminate them at any time, and absent acceleration, all that unvested equity simply vanishes.

How This Can Be Used Against VCs

While founders worry about not having enough acceleration, VCs worry about having too much. Overly generous acceleration provisions can torpedo deals or significantly reduce the acquisition price, directly hurting investor returns.

The 100% Single-Trigger Disaster

Imagine you're a VC who invested in a company that granted 100% single-trigger acceleration to all employees with stock options. Now the company is getting acquired. Let's run the numbers on why this creates a nightmare:

Here's where it gets ugly. The acquiring company was expecting to pay out $2.25M in vested options at close and retain employees with the remaining $2.25M vesting over time. Instead, they now have to pay out $4.5M immediately, and every employee is now flush with cash and has zero golden handcuffs to stay.

The Deal-Killing Scenario

When the acquirer discovers this issue during due diligence (and they always do), they have two options, both bad for investors:

Option 1: Walk away from the deal. If the acquirer was buying the company primarily for the team and talent, 100% single-trigger acceleration makes the deal untenable. Why pay $30M for a company when the entire team will be independently wealthy and likely to leave immediately after close? The deal dies, investors get nothing.

Option 2: Reprice the deal downward. The acquirer says, "We were valuing this acquisition at $30M assuming normal retention. With single-trigger acceleration, we're re-pricing to $25M to account for the retention risk and the extra cash we have to pay out immediately." The VCs just lost $5 million in value.

The Post-Close Exodus

Even if the acquirer doesn't reprice, single-trigger acceleration creates massive post-close risk. Let's say the deal closes at the original $30M, and all employee equity vests immediately. What happens next?

The 25-person engineering team, which was supposed to stick around for at least 12 months to integrate the product, starts leaving within 60 days. The product integration falls apart. The acquirer realizes they paid $30M for code and a team, and the team is gone.

In the worst cases, acquirers have sued to claw back consideration or invoked Material Adverse Change clauses to unwind deals. Even if the deal technically survives, the VCs have destroyed their reputation with the acquirer, making future exits to that buyer much harder.

Why VCs Insist on Double-Trigger

This is why sophisticated VCs will insist on double-trigger acceleration in term sheets, or at minimum, cap single-trigger acceleration at 25% for founders only. They've seen too many deals fall apart or get repriced because of overly generous acceleration provisions.

From the VC perspective, acceleration clauses are a classic misalignment of incentives. Founders want maximum acceleration to protect themselves. Acquirers want minimum acceleration to retain talent. VCs are stuck in the middle: they need to keep founders happy and motivated, but they also need deals to close at full value.

The compromise is typically double-trigger acceleration with relatively generous percentages (50% to 100%) but only firing if both the acquisition and a qualifying termination occur. This protects founders from getting screwed while giving acquirers the retention tools they need.

Why This Matters: M&A as the Most Common Exit

If you're building a venture-backed startup, you need to understand that acquisition is by far the most common exit path. According to industry data, fewer than 1% of venture-backed companies go public. The vast majority exit through M&A, and the median acquisition price for venture-backed companies is between $20M and $50M, not the unicorn billions you read about in headlines.

This means vesting acceleration clauses aren't edge cases. They're the primary mechanism that determines how much value you actually capture when your company exits. You can negotiate a great valuation, fight for favorable liquidation preferences, and execute brilliantly, but if your acceleration provisions are weak, you can still walk away with a fraction of what you expected.

The power dynamics in M&A are brutal. Once an acquisition is in motion, founders have very little leverage. If you don't have strong acceleration provisions in your stock option agreement before the deal starts, you're not going to get them during the deal. Acquirers will not agree to add acceleration during M&A negotiations; they'll simply structure the deal to minimize what you receive.

This is also why the relationship between founders and investors matters so much. When push comes to shove in an M&A scenario, VCs may prioritize their relationship with the acquirer over protecting founder interests, especially if the acquisition represents a decent return for the fund. Founders need to negotiate their acceleration provisions at the time of financing, not at the time of exit.

The "Good Reason" Definition: Critical Fine Print

Double-trigger acceleration typically requires termination "without cause" or resignation for "good reason." The definition of "good reason" is where deals get made or broken, and it's one of the most heavily negotiated provisions in stock option agreements.

Good reason typically includes:

• Material reduction in base salary (usually 10% or more)
• Material reduction in responsibilities (e.g., CEO becomes VP)
• Relocation requirement (forced to move more than 50 miles)
• Material breach of employment agreement

The problem is that acquirers are very good at constructive termination that doesn't technically meet these definitions. They can make your life miserable, strip away your team, change your role just enough to be demoralizing but not "material," and wait for you to quit without good reason.

Smart founders negotiate for broader "good reason" definitions, including things like change in reporting structure, reduction in budget authority, or elimination of direct reports. The more specific and comprehensive the "good reason" definition, the better protected you are.

What to Negotiate at Different Stages

Your leverage to negotiate acceleration provisions varies dramatically depending on when you're negotiating:

At Company Formation

Maximum leverage. Negotiate for 100% double-trigger acceleration for founders. You can often get single-trigger for founders if investors aren't sophisticated, but expect pushback from good VCs.

At Series A/B

Moderate leverage. VCs will push for double-trigger only. Fight for 100% double-trigger rather than partial. Make sure "good reason" definitions are comprehensive.

During M&A

Almost no leverage. Whatever is in your stock option agreement is what you'll get. Acquirers will not improve your acceleration terms during the deal.

Key Takeaways

• Vesting acceleration determines who captures value in M&A, which is the most common exit path for startups.
• Single-trigger acceleration vests equity immediately upon acquisition. Founder-friendly but deal-risky.
• Double-trigger acceleration requires acquisition plus qualifying termination. Balances retention and protection.
• No acceleration is a trap. You can lose millions if terminated post-acquisition without acceleration provisions.
• 100% single-trigger can kill deals or cause repricing, hurting investor returns and your relationship with acquirers.
• The "good reason" definition matters enormously. Negotiate broad definitions including role changes and relocation.
• Negotiate acceleration before you need it. During M&A, you have no leverage to improve terms.