Figma Adobe Acquisition Planning - Part II - Developing A Sales Plan
I’m excited to share this second installment of my guide for Figma staff preparing for the potential Adobe acquisition. To dive into tax planning considerations, refer to Part I.
This potential exit could be financially life-changing for some Figma employees, especially those in senior leadership positions or those who joined before the Series C in 2019. Now is the time to pause and ask, ‘How much is enough?’ Based on my experience, individuals who have dedicated an immense amount of energy to building a company leading up to a liquidity event often are tired. The prospect of having sufficient after-tax proceeds from the acquisition promises a much-needed break. But when do you take that break, and how much of your equity do you liquidate when?
Holding Adobe Shares
I recommend contemplating "how much is enough" sooner rather than later for two primary reasons. Firstly, after the merger between Figma and Adobe, Figmates will need to decide how much of their ownership stake in Adobe they want to retain as Figma stock is exchanged for Adobe shares. With Adobe's capitalization on the current demand for artificial intelligence-related technologies, ADBE stock has soared in 2023. The decision to sell Adobe stock could be challenging. So, how can you navigate this process?
Consider navigating how much Adobe stock by beginning with how much after-tax you need to secure financial freedom for you and your family going forward. While we hope that Adobe stock will continue to rise indefinitely, employees who experienced IPOs or major market peaks of companies like Asana, Coinbase, Lucid, or Pinterest can attest to the discouragement of holding a majority of their net worth in their company stock through a peak and into a valley. For some, retaining this stock during its decline made the difference between a lifetime of financial freedom and the need to continue working indefinitely.
Developing A Sale Plan
I’ve worked with clients to consider and develop different stock sale cadences. Sometimes, it has made sense to sell a large portion of shares upfront and then wait a few years to sell the remainder. In other cases, a measured cadence of selling 20% or a specific value of shares each year better aligns with a person’s cash flow needs. In other instances, securing financial freedom on the front end feels more comfortable, followed by selling a set number of shares each year for an extended period. Either way, it’s worth putting the plan in writing with a Google Doc or Excel spreadsheet to hold a rules-based strategy rather than emotionally responding to the whims of the market.
Remember that once liquidity occurs, you’ll continue to be subject to quarterly trading window limitations. Having a plan before the trading window opens can help minimize the stress of developing a plan on the fly.
Navigating Retention Grants
The second reason to consider "how much is enough" is the likelihood that Adobe will award substantial retention equity grants to Figmates as the deal is finalized. Adobe's objective will be to retain staff and maintain the organization's intellectual capital and skill set. I’ve observed that without a clear idea of what "enough" means to you personally, the decision to leave a company after a liquidity event can be driven more by ‘how much stress can I handle’ rather than ‘Is this the right time for me to leave on a personal and professional level?’
Determining how much Adobe stock to sell is deeply personal; everyone's goals and equity holdings are different. At San Francisco Wealth Planning, we run projections considering current household spending data, future spending goals, taxes, and various potential rates of return on investments while modeling the effects of inflation and investment volatility. By thoroughly examining what "enough" means personally, we can help our clients decide how much to sell, the cadence at which to diversify, and how long to stay invested.
Whether you take time to work with a financial planner or begin on your own to think through your future goals and resources, spending time contemplating the decision before you have to make the decision can go a long way in giving you peace of mind through an exciting but potentially overwhelming series of financial decisions.
Planning For A Cash Infusion
As a part of navigating the influx of cash you’ll experience with the Adobe acquisition, you’ll want to be diligent about holding cash optimally rather than letting it sit in a checking account. Here’s an article on tax-efficiently managing cash in our current interest rate environment.
I hope this has been helpful for you. If you’d like help with any of the items discussed here, let’s start with a conversation.