CASE STUDY 1
M&A Windfall
PROFILE
Alice
Age 35
VP, Marketing – Tech startup
Objective
Her employer is about to be acquired by a larger competitor, and she needs a plan to turn her stock option windfall into a lasting financial victory.
Current situation:
Alice had swiftly climbed the ranks of tech startups where she’s worked, and having reached a senior role at a firm that is set to be acquired, the windfall she’ll receive exceeds the size of all of her existing cash savings and investments combined.
With a low-interest mortgage on her condo and an emergency fund already in place, fully contributing to her 401(k) won’t even begin to make a dent in investing her excess cash on hand.
With a sudden inflow of wealth arriving, she recognizes an even greater imbalance between the amount of financial assets she has earned and the amount of time she has to manage them effectively.
And, much like she’s seen in business, she knows that she needs to delegate to someone who specializes in helping people just like her if she wants to get the best outcome for herself.
How Paceline can help:
Alice was looking to invest her new wealth in a way that will continue to grow her money, with an approach that takes close consideration of her career path, and personal situation. She knew she needed help to do that, so she engaged a financial advisor.
After a thorough conversation to get a close understanding of her financial situation and what matters most to her, her advisor developed a financial plan to see that she achieves each of her financial goals, and implemented an investment strategy tailored to her needs.
In particular, her investment strategy took close consideration for the fact that most of her money is now in taxable investment accounts, and that from an income standpoint she had a “big” year. This meant special care needed to be taken to avoid unnecessary taxes.
Acutely aware of the organizational change that often tends to follow an acquisition, Alice was also actively looking for a new opportunity in the startup scene.
As she received job offers, her advisor was also able to help her evaluate the stock component of each of those opportunities. Having reached an executive role, this was especially important as stock options were an increasingly large portion of her total compensation package.
Having worked at several successful startups, she understood that the trajectory of any high-growth startup was bound to change over the course of a typical 4-year vesting period.
That’s why her focus was trained on the most fundamental question about employer stock that can be answered upfront:
“If my company does well, will I do well (or not)?”
Because her advisor specialized in helping tech professionals, she was armed with the information she needed to understand what she was being offered within the short window of time she had to decide upon each job offer.