Meaning
Immediate vesting of unearned equity occurs automatically when a change of control event takes place. Under single-trigger acceleration, the founder or principal employee receives their full allocation of shares the moment the company is acquired. This differs from double-trigger arrangements which require both a sale and a subsequent termination of employment.
Exit Protection
Early liquidity is guaranteed for the recipient regardless of whether they stay with the new parent company. This provision reduces the risk that an acquisition will strip the founder of their remaining equity value. It ensures that the person who built the value shares in the final sale price.
Acquisition Friction
Buyers often dislike this provision because it reduces the incentive for essential talent to remain after the deal closes. Because single-trigger acceleration provides a complete payout, the founder may choose to exit the seat immediately after the merger is finalized. This potential talent drain can lower the overall purchase price offered for the firm because the buyer must allocate more funds to new retention bonuses for the remaining staff.
Founders Security
Freedom to pursue an exit comes from having this clause in the initial contract. The financial cost to the buyer is calculated during the due diligence phase. Security for the individual comes from the early settlement of the equity contract.
