Financial Advisor Insights

About to be Acquired: Managing Personal Finances During M&A Activity

Every industry has its own unique challenges. For professionals in biotech, pharma, and life sciences, the challenge is that most individuals don't stay at one company long enough to understand the benefit package or get their finances in order. Even when frequent job transitions are considered normal, finding out your company is about to be acquired can still be very stressful time for many employees. Although navigating this period of personal and professional uncertainty can be difficult, it's important to stay focused on what you can control and, to the extent possible, prepare for various outcomes.

Riding the M&A rollercoaster

Depending on the size of your company and your role, you might find out about a deal in the works early on, which can be both a blessing and a curse. Hearing the news through a press release or under similar circumstances often hits like a bomb. While you try to make sense of the news, do your best to remain as unemotional as possible.

If you have not gone through this before, keep in mind that the deal isn't final until it is. The offer timeline, negotiations, and due diligence process can vary significantly with each deal. Expect the rumor mill to be active and the stock price to be volatile during this time.

Even after the deal is finalized, it often takes months to sort out what the merger or acquisition means for employees. Throughout the process, try to keep an open mind about what this means for you financially and professionally. As you await additional clarity and details, there are some things you can do to get better prepared for the transition.

Should you stay or should you go?

While staying at the resulting organization post-deal may not be totally up to you, timing is important. Leaving on your own could mean missing out on a large severance package. Further, additional time at the company before the deal is finalized means you'll have longer to vest in or earn certain benefits, such as a 401(k) match, bonus, stock options, or restricted stock units. As you consider new opportunities with other companies, consider the pros and cons of leaving before the dust settles.

Managing benefits while changing jobs

There are, of course, many non-financial issues to consider during this time as well. If you have been thinking about shifting your focus or exploring another part of the industry, this may be a great time to seriously investigate what that kind of transition may look like. Until the transition period begins, you likely won't know what the new company or resulting organization may have planned for you. Until then, try to keep an open mind, as M&A activity can be instrumental in launching a career.

Regardless of how you ultimately decide to move forward, try not to let the stress or frustration of the situation impact your professional relationships. Especially in biotech hotspots like Cambridge and Boston, you never know who you'll end up working with again.

Organize your finances

With so many frequent job changes, it's common for professionals in life sciences to have multiple old retirement plans left behind. One of the first things we will do with new clients is help them consolidate all of their old 401(k)s and IRAs at one financial institution, so they can be viewed and managed in one place.

As you're logging into your retirement accounts, take a look at your current 401(k). When was the last time you rebalanced your investments? Is your asset allocation appropriate? Are you taking advantage of low-cost investment options? Finally, review your plan documents to find out when you're vested in any company matching contributions.

During this process, also take a look at how much cash you're keeping on hand. While a typical rule of thumb suggests holding 3-9 months of non discretionary expenses in a savings account depending on your situation, some individuals end up holding way more cash than they need simply because they're not sure how best to use it.

Transitional periods can be a perfect opportunity to get organized and seek help from a fee-only financial advisor to begin taking a more deliberate approach to planning and investing.

Track your stock options or restricted stock units

If you have been granted incentive stock options (ISOs), non-qualified stock options (NSOs), or restricted stock units (RSUs), you know how important your vesting schedule is. Should you leave your company before the merger or acquisition is complete, you will almost certainly forfeit your unvested options or awards.

But what happens to stock options or RSUs after a company is acquired? Although unvested options or awards can be cancelled, in most situations employees don't walk away empty-handed. What will ultimately happen to your stock options or awards will depend on a number of factors, such as the terms of the deal and provisions contained in the M&A agreement, your equity incentive plan, type of equity compensation granted, and so on. Read more on what happens to stock options or restricted stock units after a merger or acquisition.

There's no doubt that navigating a job transition can be unsettling, particularly when you have little control over the process and outcome. Keeping your focus on the aspects you can control and maintaining a positive outlook about the potential opportunities that may arise as a result of the pending deal can help with the day-to-day.

Darrow Wealth Management is a fee-only wealth management firm with offices in Boston, MA and Concord, MA. To learn more about how we work to help professionals in biotech and life sciences reach their financial goals, contact us to schedule an introductory consultation.

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