Financial Glossary
Single-trigger acceleration
Single-trigger acceleration is a provision in an equity compensation or option agreement that causes some or all unvested shares or options to vest automatically upon the occurrence of a single defined event -- most commonly a change-of-control transaction such as an acquisition or merger. The trigger does not require any further condition, such as the employee being terminated. It is a form of employee protection designed to prevent acquirers from retaining key personnel through unvested equity while reducing the employee's total compensation by paying a lower acquisition price. It is contrasted with double-trigger acceleration, which requires both the change-of-control and a triggering employment event (typically involuntary termination).
Problem & Application
A startup's CTO holds options on 400,000 shares, of which 200,000 are unvested at the time of acquisition. Under single-trigger acceleration, all 200,000 vest immediately upon deal close, regardless of whether the CTO stays or goes. If the deal is priced at $10 per share, that is $2,000,000 in additional compensation the acquirer must account for when pricing the deal -- it comes directly out of proceeds available to other shareholders. Acquirers often dislike single-trigger provisions because they remove retention leverage and increase transaction cost without guaranteeing the key person stays post-close. Founders negotiating employment agreements or key-employee option grants should model both triggers to understand the M&A economics. Double-trigger is generally preferred by acquirers and is the market standard for post-Series A companies.
In Short
While beneficial for employees, single-trigger acceleration can impact company valuation and acquisition negotiations.
How it works
Mechanically, the provision attaches a vesting schedule override to a defined event: when the trigger fires, the unvested portion (or a stated percentage of it) converts to fully vested, so the holder's economic stake equals fully vested shares times the deal price per share, minus any exercise cost on options. In practice these clauses live in offer letters, option grants, and restricted-stock agreements, and acquirers scrutinize them during due diligence because vested equity is harder to use as a retention tool post-close. A common misunderstanding is that single-trigger acceleration is purely upside for the employee: under IRC Section 280G, acceleration tied to a change of control can count as a "parachute payment," and if total parachute payments hit three times the recipient's base amount, the excess triggers a 20% federal excise tax on the individual and a lost deduction for the company.
Worked example: single-trigger acceleration at a regional RV-park operator
A general manager at a multi-property campground company holds options on 100,000 shares with a $2.00 strike. At the time a larger hospitality group acquires the business, 60,000 options are vested and 40,000 are unvested. Her grant includes 100% single-trigger acceleration on a change of control. When the deal closes at $7.00 per share, all 40,000 unvested options vest immediately, no termination required. Her newly accelerated shares are worth 40,000 x ($7.00 - $2.00) = $200,000 in additional spread, on top of the $300,000 already vested. That $200,000 is consideration the buyer must fund from the purchase price, reducing proceeds to other shareholders. It also counts toward her Section 280G parachute-payment calculation, so if her total change-of-control payments exceed three times her base amount, part of that gain could face the 20% excise tax.
Frequently asked
What is the difference between single-trigger and double-trigger acceleration?
Single-trigger acceleration vests equity when one event occurs, almost always a change of control such as an acquisition. Double-trigger requires two events: the change of control plus a qualifying employment event, usually involuntary termination or resignation for good reason within a set window after closing. Double-trigger is now far more common in startups.
Why do acquirers dislike single-trigger acceleration?
Single-trigger vesting hands employees fully vested equity the moment a deal closes, so the acquirer loses unvested equity as a retention lever to keep key people. It also increases the amount the buyer must fund from the purchase price and can complicate Section 280G golden-parachute calculations, which together can lower the price offered or stall negotiations.
Is single-trigger acceleration taxable to the employee?
Yes. Accelerated vesting is generally taxed like normal vesting in the year it occurs: option spread is typically ordinary income, and restricted stock is taxed at vesting unless an 83(b) election was made. If the acceleration is tied to a change of control, it may also count as a parachute payment under Section 280G, potentially adding a 20% excise tax. Consult a tax advisor.