Five Things to Know Before Accepting Your Tender Offer

By Cody Terrion

If you’re a tech employee holding startup equity, receiving a tender offer can feel like your long-awaited payout. It’s a rare chance to convert paper wealth into actual liquidity. But as a financial advisor who has worked with dozens of tech clients through these decisions, I can tell you that accepting a tender offer without a strategic lens is one of the most common and costly mistakes I see.

There is a lot to gain, but also a lot to evaluate. Tender offers can provide immediate liquidity, but they also represent an important opportunity to reassess and realign your financial strategy. Here are five key areas I advise every client to consider before participating.

1. Know What You're Actually Being Offered

Start with understanding the offer mechanics. A tender offer occurs when your company or an outside investor offers to buy back some of your shares. This often takes place before a major liquidity event like an IPO or acquisition. It allows you to sell a portion of your equity in a private company and access cash, which is not otherwise available.

Not all shares may qualify. Whether you can sell depends on your grant type, your vesting status, and the terms of the offer. Some offers are capped, limited to certain employees, or exclude recently granted or unvested shares.

You should closely review the offer documentation. Pay attention to how the share price is determined, what types of shares are eligible, and whether there are any lock-up periods or restrictions after the sale. These details affect how much value you can actually extract.

2. Understand the Full Tax Picture Before You Sell

Taxes often present the biggest surprise in a tender offer. The impact can be significant and is often misunderstood by employees who are unfamiliar with equity compensation.

Incentive Stock Options (ISOs) require careful handling. Selling ISOs within a year of exercise or two years of the grant date disqualifies them from favorable long-term capital gains treatment. Instead, the income is taxed as ordinary income. Exercising ISOs and holding them may also trigger the Alternative Minimum Tax, which creates a tax liability even if you do not sell the shares.

Non-Qualified Stock Options (NSOs) are taxed at the time of exercise based on the difference between the strike price and the fair market value. Any gains beyond that at the time of sale are treated as capital gains.

Restricted Stock Units (RSUs) are taxed as ordinary income when they vest. If you sell them immediately, there is typically little or no additional tax. If you hold them and the stock appreciates, capital gains tax may apply when you sell.

Before participating, run a detailed tax projection. Many employees do not withhold enough or make estimated tax payments in advance, which can lead to a large unexpected bill. A CPA who understands startup equity should help you map out different sale scenarios and prepare accordingly.

3. Think About Your Broader Financial Plan

Tender offers should be evaluated in the context of your full financial picture. I often see clients focus solely on the question of whether they should sell, without considering how that decision aligns with their long-term goals.

One key consideration is concentration risk. If a large percentage of your net worth is tied to your employer’s stock, selling some shares may reduce your overall risk. The proceeds from a tender offer can then be reallocated into other investments that better align with your risk tolerance and timeline.

On the other hand, if you believe strongly in your company’s long-term prospects, holding more shares might be appropriate. In either case, the decision should reflect personal goals such as saving for a home, funding a future business, or achieving greater financial independence.

Planning scenarios can help clarify these tradeoffs. Compare what your portfolio looks like if you sell now, sell later, or sell only a portion. Consider both the potential upside and the associated risks.

4. Consider Timing, Both Personal and Financial

Most tender offers have a defined expiration date. While this creates urgency, it should not drive a rushed decision. The timing of your participation can have a meaningful effect on both your taxes and your financial outcomes.

For example, if you are close to meeting the holding periods required for long-term capital gains, waiting a few months could significantly lower your tax rate. Selling earlier could mean a higher tax bill without a proportional increase in liquidity.

You should also think about your life outside of work. Are there large expenses coming up? Are you considering a career transition or planning a major move? Liquidity today may help support those changes, but the tradeoff is less exposure to future growth if the company performs well.

Your knowledge of the company’s potential timeline for an IPO or future tender events also matters. If a liquidity event is likely in the near term, you may want to wait. If the path is uncertain, diversifying some risk now could be the more prudent option.

5. Don’t Make This Decision Alone

Equity compensation involves a complex set of variables. Taxes, grant types, vesting schedules, and company-specific factors all intersect. These are not decisions most people should make without guidance.

Work with professionals who understand equity. A financial advisor can help evaluate how a tender offer fits into your overall plan. A tax advisor can run accurate projections and help you avoid surprises. An attorney can assist if your offer includes any unusual restrictions or agreements.

A strong advisory team can help you make confident, informed choices. Too often, employees make quick decisions based on urgency or peer pressure and regret not seeking guidance sooner. Taking the time to evaluate all angles now can lead to better outcomes and fewer headaches down the road.

A tender offer is not just a moment to cash out. It is a chance to take control of your financial future, potentially reduce some risks, and realign your equity with the life you are seeking to build.

Contact Atlas to review your equity position, run tax projections, and make a plan tailored to your financial goals before your tender offer window closes.

Atlas Financial Services, Inc. (“Atlas Financial”) is a technology company and owner of ATFS Advisers LLC (“ATFS”).  Atlas Financial and ATFS are collectively referred to as “Atlas”. All advisory services are offered through ATFS, an SEC registered investment advisor.  The views and opinions expressed herein are those of the speakers and authors and do not necessarily reflect the views or positions of Atlas.