This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
A founder in this situation faces a question that faces a question last spring two days after she had signed the LOI. The price was where she wanted it. The retention package the buyer had floated for her and her two co-founders was generous. What she had not yet thought about, and what her financial advisor had not flagged for her, was what would happen to the equity held by her engineering lead, her head of customer success, and the eleven other unvested-equity holders below the C-suite line. She knew the term “double trigger” from her option plan because she had seen it on the equity grant. She did not know that the buyer was about to use the structure of her existing equity documents to do something she had not bargained for.
I asked her to send me three things: her equity incentive plan, the form of award agreement her grantees had signed, and the LOI. She sent them within an hour. Reading those three documents together — the plan, the agreement, the LOI — I could already see what the buyer was about to do, and I could see the conversation she was about to have to manage with her team. The single-trigger versus double-trigger choice in the underlying equity documents controlled the conversation almost entirely. The LOI didn’t override it. The merger agreement, when it came, would track it. And the founders, having never thought about this term during their fundraising rounds, had inherited a structure that was going to silently re-price about a third of their team into staying for two more years against their will.
This is the part of an M&A deal that most founders learn about in the worst possible posture — once the deal is in motion, once the LOI has named the price, once the buyer’s HR diligence is well underway. The terms “single trigger” and “double trigger” sound like equity-doc plumbing. In a sale, they decide who on your team is treated as a bought-out shareholder and who is treated as a continuing employee whose unvested equity is now leverage. The two are very different people. The drafting choice in your equity plan, made years before the sale, is what assigned them.
What the two structures actually mean
Single trigger vesting acceleration means that one event — typically the change of control itself — accelerates the vesting of the grantee’s equity. The deal closes; the unvested portion vests; the holder cashes out alongside the vested holders. The grantee’s equity is treated as paid-in-full at closing, regardless of whether the grantee continues with the buyer or not.
Double trigger means two events have to occur before acceleration kicks in. The first is the change of control. The second is some form of employment-side event after closing — most often termination without cause or resignation for good reason within a defined window (one year is common, two years not unusual). If the grantee continues with the buyer through the window without being terminated and without a good-reason event, the equity continues vesting on the original schedule, but now the “equity” is the buyer’s substitute consideration — typically replacement options or restricted stock units in the buyer — vesting against the buyer’s employment terms.
The two structures produce very different outcomes for the same person. A senior engineer with 25 percent unvested under single trigger walks out of the closing room with 100 percent of her equity proceeds. The same engineer under double trigger walks out with 75 percent and a continuing claim on the remaining 25 percent that vests over the next eighteen to thirty months — but only if she keeps her job. The buyer’s decision to keep her or replace her in the integration is what determines whether the remaining 25 percent ever lands in her account. The buyer has, effectively, gained a one-sided option on a chunk of her compensation.
Why buyers prefer double trigger — and what they actually do with it
The buyer’s framing in diligence is uniformly the same. Buyers do not want to pay full closing consideration to employees who will leave the day after closing, because those employees take both the cash and the institutional knowledge with them, and the buyer ends up paying twice — once for the equity and again for the replacement hire and retention bonus. Double trigger, in the buyer’s framing, aligns the equity holder’s incentives with the integration’s success. The framing is not wrong on its face.
The use case the framing obscures is the one founders need to see clearly. A buyer that intends to keep your engineering team will treat double trigger as a backstop they hope never to use. A buyer that intends to replatform the engineering work onto its own stack will treat double trigger as a controlled-cost mechanism for shedding your team at low expense. The same clause produces both outcomes. The clause does not tell you which kind of buyer you are dealing with. Only the buyer’s integration plan tells you that, and the integration plan is rarely disclosed in the LOI.
The asymmetry is sharpest in scenarios where the buyer’s substitute equity is granted on terms that are quietly more dilutive or longer-vesting than the original grant. The buyer’s stock plan replaces your option with a buyer option of equivalent fair value at closing, but the buyer’s strike price, the buyer’s vesting cliff, and the buyer’s continuing-employment forfeiture rules all apply. A senior employee who held a fully-vested-in-three-years option at closing can find herself holding a buyer option that re-cliffs at twelve months and re-vests over four years on the buyer’s grant schedule. The economics are theoretically equivalent at closing; the employment lock-in is materially longer.
The MIP-on-top trap
The companion conversation to the acceleration clause is the management incentive plan — the new equity-and-cash incentive structure the buyer offers to retain the team after closing. Founders often hear “you’ll get a MIP, you’ll be made whole” and assume the MIP cures whatever double-trigger gap exists in the existing plan. Sometimes it does. Often it does not. The MIP is typically a new grant of buyer equity vesting over a fresh three-to-five-year period, frequently with a service-based cliff. The retained employee’s economic position becomes: (a) the immediately-paid-out vested portion of the legacy plan, (b) the never-paid-out unvested portion of the legacy plan that converted into buyer equity and was forfeited at termination, plus (c) the new MIP grant that vests on the buyer’s clock. Under double-trigger plus standard MIP, (b) is the buyer’s free option and (c) is the employee’s reason to stay.
For the founder, the practical question at the LOI is whether the buyer’s MIP economics are sized to make the retained employees whole on the (b) leg they are forfeiting under double trigger. Sometimes the LOI specifies an aggregate MIP pool — 5 percent of equity, 7 percent of equity. Founders should run the arithmetic: if the unvested-equity-as-of-closing across the retained group is 8 percent of the company, and the MIP is 5 percent, the buyer has implicitly priced the retention package below the value of what it is taking back through the double-trigger structure. The retained group will figure this out within the first quarter post-closing and the founder will spend her first integration year managing morale that the LOI structure created.
What sophisticated buyers will agree to — and what they won’t
The clean drafting move at the LOI is to convert the existing plan’s vesting acceleration to single trigger for closing purposes, with a contractual side-agreement among the founders and key employees about how much of the single-trigger proceeds will be voluntarily put back into a retention pool. The structure preserves the employee’s bargained-for equity position, eliminates the buyer’s free option on continued employment, and lets the founders allocate retention dollars deliberately rather than letting the buyer’s HR allocate them by attrition.
Buyers will resist this move, primarily on tax and accounting grounds. Single-trigger acceleration of stock-based compensation in a change of control creates § 280G excess parachute payment exposure for the disqualified individuals, and the buyer’s tax counsel will run the cleansing-vote math against the parachute thresholds. The 280G analysis is real and the buyer’s concern is legitimate; it is not, however, dispositive. There are well-trodden structures — partial single trigger, modified single trigger that accelerates only on a qualifying termination, and reasonable-compensation arguments that mitigate the 280G hit — that can accommodate the founder’s retention goals within the parachute constraints.
The second buyer objection is accounting. ASC 718 modification accounting for the acceleration triggers an incremental compensation charge on the buyer’s post-closing financials. The charge is not trivial in a large deal but is rarely material to a strategic buyer’s earnings. The objection is a real one but it tends to be overstated.
The third buyer objection — the one founders should pay closest attention to — is that the buyer’s integration plan depends on retention of specific named employees and the buyer wants the double-trigger structure as leverage. This objection should be taken at face value. It is the buyer telling the founder which employees the buyer intends to keep and, by implication, which it does not. The founder’s negotiating posture from there is to push for either (i) single-trigger acceleration with a contractual retention pool, or (ii) double-trigger structure with a contractually-specified MIP pool sized at full economic replacement of the forfeit-at-termination scenario. The first is cleaner. The second is more common and survivable if the MIP arithmetic is done honestly.
The conversation founders are not having before the LOI
The mistake the SaaS founder I described made was not a drafting mistake. It was a sequencing mistake. She let the buyer set the price and the retention package terms in the LOI before she had counted who on her team was sitting on what amount of unvested equity, and how much of the closing consideration was going to be unwound through double-trigger and MIP combined.
The pre-LOI homework is, in honest terms, half an afternoon. Pull the cap table. Pull the option ledger. Identify the holders with unvested equity and rank them by amount. Read the form of award agreement to confirm single or double trigger. For the double-trigger grants, calculate the deal-consideration value of the unvested portion that will be subject to forfeiture-at-termination under the buyer’s continuing-employment terms. Compare to whatever MIP size the buyer has signaled. If the gap is meaningful — and on most deals where the cap table is broad it will be meaningful — bring the gap to the LOI as a specific negotiating point before signing.
The founders who do this homework before signing the LOI find the conversation with the buyer easier, because the buyer’s response to a specific number is more constrained than its response to a general request. The founders who do not do this homework discover the gap during the diligence-week town halls when their senior employees do the same arithmetic and realize that the structure of the deal has quietly priced them into staying. The same dynamic shows up in PE deals in a slightly different form, and the practical advice is the same: read the equity documents before you sign the LOI, not after.
For related M&A reading on this site, see our posts on earnout acceleration on a change of control of the buyer, closing-date non-compete re-up for key employees, and the founder non-compete in 2026.
If you are a founder who has just signed an LOI and is now reading the equity documents the buyer wants to inherit, or one who is approaching an LOI and has not yet thought through which of your employees will be holders versus continuing employees post-closing, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
