The tech world has been abuzz with the news of the Informatica acquisition by Salesforce since it was announced. This M&A transaction holds the potential for exciting changes and opportunities, but it also raises important questions about what will happen to your employee stock options, Restricted Stock Units (RSUs), Performance Stock Units (PSUs), and owned shares. For many employees, these are an important piece of your total compensation package, and understanding how they will be handled in this transaction is crucial to receiving everything that you have earned.

In this comprehensive guide, we will delve deep into the intricacies of the Informatica-Salesforce acquisition, providing you with the knowledge and strategies you need to navigate this complex process confidently, while avoiding costly mistakes and missed opportunities.

Why Is This So Important?

In most cases, waiting for a deal to close can be a big distraction from day-to-day work activity, so if you are in that boat as many people find themselves, take the time to get your finances in order so you can make the most of this opportunity.

For Some Context:

Before we dive into the specifics, let's first understand why the handling of your employee stock options, RSUs, PSUs, and owned shares in the Informatica-Salesforce acquisition is so vital. Here are two significant reasons:

Avoiding Costly Errors: In large-scale corporate transactions like this one, the amount that you’ve receive for your stock is formulaic (i.e., a specific amount of cash and/or shares for every share, stock option, RSU, or PSU you own), but the process for actually paying them out tends to be manual. Instances of employees having their payout miscalculated or incorrectly distributed, or stock grants not being formally issued in advance of the close of the deal do occur.

To be clear, this is not a reflection on either party involved, but an observation of what some of our clients have experienced during periods of organizational transition. Given the whirlwind of activity, and staff turnover that tends to coincide with M&A, it is critical to understand exactly what you have earned, and that you promptly receive it.

Pro-tip: In cases where an employee was offered stock options, RSUs, or PSUs, and they do not have stock grant documents in hand to substantiate that they were formally issued, an employee would have no recourse if they did not remedy the situation before the close of the deal.

How Paceline Can Help

At Paceline Wealth Management, we are committed to helping you make the most of your employer stock proceeds (or new Salesforce stock awards) that you receive as a result of the Informatica-Salesforce acquisition. Here's how we can assist you at every step of the way:

1. Comprehensive Data Gathering:

We will work with you to gather all relevant information, including stock grant documents and details on vesting schedules. Among employees with stock-based compensation, it’s not uncommon to have multiple stock grants, and several different types of employer stock. Each of these has its own attributes in terms of how value is achieved, and how taxes are handled.
Understanding the nuances of vesting, as each type of employer stock is handled differently. Part of this relates to rules in the company shareholder plan, and part of this relates to how the deal was negotiated between the acquisition target and the acquiring firm.

2. Strategic Financial Planning:

Once we have a clear picture of your stock compensation, we will help you update your financial plan to align with your new financial situation. Unlike reinvesting or rolling over an old 401(k) or IRA, employer stock awards are held in a taxable investment account so speaking with a financial advisor about finding ways to reduce taxes is an important consideration. That’s because when M&A occurs, it typically results in compensation that is earned over multiple years (i.e., stock vesting periods) arriving all at once, pushing you to a higher tax bracket.
We will discuss your financial goals and get a close understanding of what has worked well for you in the past (and equally important, what has not). Only once we get to know what matters most to you, and what your financial goals are, can we provide guidance on how to manage the proceeds you receive, including options for saving, investing, or repaying debt.

3. Optimizing Salesforce Stock Holdings:

We will collaborate with you to determine the most appropriate course of action for managing your new Salesforce stock. This includes deciding when to sell or reinvest any new shares of Salesforce stock that you receive into other assets to optimize your overall investment portfolio.

Upon Transaction Close

When the Informatica-Salesforce acquisition reaches its closing stages, you will be faced with critical decisions regarding the handling of your owned shares, stock options, RSUs and PSUs. Let's take a closer look at how each form of employer stock will be handled:

Owned Shares:

You will receive the merger consideration, which is $25 per share.
Note: This includes previously exercised stock options, as well as vested RSUs and PSUs which have converted into common shares of Informatica stock.

Stock Options:

In the Money (vested): If your stock options are "in the money" (i.e., the merger consideration of $25 exceeds the exercise price), and they are vested, you will receive the merger consideration less the exercise price. As an example, stock options with an exercise price of $20 would receive $5 in cash for each option.
In the Money (unvested): If your stock options are “in the money”, but have NOT yet vested, they will be converted into new Salesforce stock options.
Out of the Money (vested, or unvested): If your stock options are “out of the money”, meaning the cost to exercise exceeds $25, they will be canceled.

RSU:

Informatica RSUs will be converted into new Salesforce RSU grants, based upon a ratio defined in the merger agreement.
The ratio by which RSUs will be converted is calculated as the merger consideration ($25 per share), divided by the Salesforce stock price at the effective date of the deal, rounded to the 4th decimal place.

PSU:

Informatica PSUs will be converted into new Salesforce PSU grants, similar to RSUs as described above. Performance vesting requirements will mirror existing grants.
However, PSU grants with a required stock price of $35 per share will be canceled, as this vesting condition is not met by the merger price per share.

Putting all the pieces together

Navigating the Informatica acquisition by Salesforce presents both opportunities and challenges. Your employee stock options, RSUs, and owned shares are valuable assets that require careful handling, and that’s where our expertise comes in. At Paceline, we are dedicated to helping you make informed decisions that align with your financial goals, and we are here to guide you through every step of this financial journey.

Big financial events like this don’t happen very often, and even among veterans of the tech industry every M&A transaction is unique, and your financial situation will be different each time you encounter it. That’s why it’s so valuable to have a financial advisor that specializes in helping people in tech navigate the process of employer M&A.

To get started, schedule a discovery meeting with Paceline using the calendar tool below, or feel free to give us a call.