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What happens to unvested RSUs (Restricted Stock Units) during a buyout depends on the specifics of the deal and the agreements between the acquiring private equity firm, the company being acquired, and the employee compensation plan. Here are the key possibilities:

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1. RSUs Are Cashed Out

• In some cases, unvested RSUs may be accelerated (vested immediately) as part of the buyout agreement.
• If accelerated, they are typically cashed out at the buyout price (e.g., if the PE firm offers $50 per share and you have 1,000 unvested RSUs, you’d receive $50,000 pre-tax).
• Whether this happens often depends on your employment agreement or the terms of the RSU plan.

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2. RSUs Are Replaced with New Equity

• Unvested RSUs may be converted into equivalent units in the new private entity (e.g., stock options or new restricted equity in the private company).
• The vesting schedule often remains the same but may reset based on the deal terms.
• This approach aligns incentives for employees to stay post-buyout and contribute to the private equity firm’s goals.

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3. RSUs Are Canceled

• In rare cases, if there’s no provision for unvested equity in the buyout agreement, the RSUs may be forfeited. This is more likely if you leave the company during or after the transaction, and the agreement doesn’t protect your unvested shares.

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4. Combination of Outcomes

• Some deals may provide a mix, where vested RSUs are cashed out, and unvested RSUs are partially accelerated, canceled, or converted into private equity.

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Factors That Determine the Outcome

1. RSU Agreement Terms:

   • Check your RSU agreement to see what happens in the case of a “change of control” (the buyout).
   • Some agreements have provisions for automatic acceleration or payouts.

2. Buyout Deal Terms:

   • The acquiring company (private equity firm) decides how to handle outstanding equity, often negotiated as part of the transaction.

3. Retention Strategy:

   • If the PE firm wants to retain employees, they may convert unvested RSUs into new equity or implement retention bonuses tied to staying through the transition.

4. Tax Implications:

   • Cashing out RSUs is typically taxed as ordinary income in the year you receive the payout.
   • If RSUs are converted into private equity, taxation may be deferred until a liquidity event (e.g., when the private company is sold or goes public again).

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What You Should Do

1. Review Your RSU Agreement:

   • Look for clauses on change of control, acceleration, or cancellation.

2. Talk to HR or Legal:

   • HR or your company’s legal team should provide clarity on what will happen to your unvested RSUs under the buyout.

3. Consult a Financial Advisor:

   • They can help you understand the tax implications and plan for the financial outcomes of the buyout.

4. Monitor Deal Announcements:

   • Pay attention to communication about the transaction—details about employee equity are usually included.

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Example Scenarios

• Buyout Price: $50/Share
  • You have 1,000 unvested RSUs.
  • If the RSUs are accelerated, you receive $50,000.
  • If converted, you may receive equivalent equity in the new private company based on its valuation.
• Private Equity Conversion:
  • The RSUs could be replaced with options or units in the new private company. For example, 1,000 RSUs might convert into options for 1,000 shares of the private company, vesting over time.

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Conclusion

The fate of your unvested RSUs largely depends on the specifics of the buyout deal and your equity plan. It’s worth consulting your RSU agreement and HR team for clarity and preparing for tax implications.