What Is Single Trigger Acceleration?

Single trigger acceleration is an equity provision that allows some or all of an employee’s unvested equity to vest immediately when a specified triggering event occurs, most commonly a change of control, such as an acquisition, merger, or sale of the company.

Normally, equity awards vest over a defined period. With single trigger acceleration, the occurrence of one qualifying event can accelerate the vesting schedule without requiring another condition to be met. The exact amount of equity that accelerates depends on the terms of the relevant equity agreement.

How Does Single Trigger Acceleration Work?

A typical single trigger acceleration arrangement may work as follows:

1. Equity is granted: An employee receives stock options, restricted stock, or another form of equity subject to a vesting schedule.
2. A triggering event occurs: The company undergoes a qualifying transaction, such as an acquisition or change in control.
3. Vesting accelerates: The specified portion of the employee’s unvested equity becomes vested immediately.
4. The transaction proceeds: The vested equity may then be treated according to the terms of the acquisition or other transaction.

For example, if an employee has unvested equity and the company is acquired, a single trigger provision could cause a specified portion of that unvested equity to vest when the acquisition closes.

Why Does Single Trigger Acceleration Matter? 

Saving the last vesting portion via a single-trigger acceleration clause at the moment of the company sale might be a nice way to give the employees additional insurance. Should there be no such clause, the employees may get their unvested equity forfeited when the acquisition-related termination of employment occurs before the original vesting schedule is fully completed.

But accelerated vesting can cause a big impact on equity ownership, transaction proceeds, dilution and financial reporting for a company. Acquisition-related acceleration provisions are likely a matter of scrutiny for buyers.

Single Trigger vs. Double Trigger Acceleration

The key difference is the number of conditions required:

• Single trigger: Vesting can be accelerated only through the occurrence of a qualifying change-of-control event.
• Double trigger: There is the change of control, plus there is another event like termination or a very drastic reduction in the employee’s role for vesting to be accelerated.

All this would depend on the terms under the equity plan and related contractual documents.

Want Help With Your Finance and Business Operations?

Equity acceleration can create important considerations for cap table management, transaction accounting, financial reporting, and employee equity records. Accurate financial processes help businesses understand the impact of equity arrangements before and during a corporate transaction.

Atidiv helps businesses streamline accounting, financial reporting, finance operations, and back-office processes through technology-enabled solutions. Our finance and accounting support helps growing companies maintain reliable records, improve financial visibility, and manage complex transactions more effectively.

Talk to an Atidiv expert to explore how Atidiv can support your finance and accounting operations.