A buyer has made an offer, the letter of intent is signed, and the next six weeks will be diligence, lawyers, and closing. Somewhere in the deal checklist is a line you had not thought about: the fractional CTO agreement. What do you owe them, what happens to any equity they hold, and do you need them through the close?
The short answer: what you owe is whatever the agreement says about notice, equity, and transition, so read it before the buyer does. Most fractional agreements were written for a company that keeps running, not one that is sold. The usual open questions are who pays for the extra diligence work, whether unvested equity accelerates, and whether the buyer wants the advisor to stay through integration. Settle each in writing early, because a surprised advisor in week five of diligence is a deal risk.
Why this comes up late
Founders sign a fractional CTO agreement at a stage when an exit feels years away. The termination clause covers ordinary endings: notice, final invoice, handover. It rarely covers an acquisition, which is a different kind of ending, because the advisor's workload goes up just before the relationship ends.
During a sale, the technical side of diligence lands heavily on whoever knows the system best. The buyer's team asks for architecture documents, security posture, open source licenses, incident history, and access to engineers. What an acquirer's technical diligence looks for covers the content. If your fractional CTO is the person who can answer those questions, they are about to be very busy, and the retainer was not priced for it.
The four questions to settle
1. Who pays for the diligence spike
A two-day-a-week retainer does not stretch to answering a buyer's data room requests at full speed. Expect your advisor to ask for extra days, and agree a rate before diligence starts rather than an invoice after. A fixed fee for diligence support, defined by scope, usually works better than open extra days. The buyer will not pay for this directly, so it comes out of your side of the deal costs.
2. What happens to unvested equity
If your fractional CTO holds options or restricted stock that vests over time, the grant documents decide what happens on a change of control. The two common forms:
- Single-trigger acceleration: some or all unvested equity vests on the sale itself.
- Double-trigger acceleration: vesting accelerates only if there is a sale and the holder's role is then ended without cause within a set period.
Advisor grants often have no acceleration at all, in which case unvested equity is treated however the deal terms say, which may mean it is cancelled. Buyers also pay attention: single-trigger acceleration on a meaningful grant means the person is fully paid out at closing with no reason to stay. Know which you have, because the buyer's lawyers will ask. If you are still setting terms, whether to pay a fractional CTO in equity covers the tradeoffs before you get here.
3. Notice and termination
If the buyer does not want to keep the advisor, the ordinary notice period applies unless the agreement says otherwise. That is usually fine, and it is a small cost in a deal. The trap is the reverse: an agreement that lets the advisor end the relationship immediately, leaving you without your main technical voice in the middle of diligence. Check both directions, and see notice periods in fractional CTO contracts for what a sensible term looks like.
4. Whether the buyer wants them through integration
Some buyers want continuity for a few months after closing, especially if the fractional CTO is the only person who understands the architecture. That is a new engagement with the buyer or the combined company, not an extension of yours. It should have its own scope, rate, and end date. Do not promise it on the advisor's behalf.
What to do the week the letter of intent is signed
- Read the fractional agreement and any equity grant documents yourself, and send them to your deal lawyer.
- Tell your fractional CTO about the deal under the confidentiality terms you already have, or add one if you do not.
- Agree in writing the diligence support scope and fee, and the end date of the current engagement if the deal closes.
- Ask the advisor to start a clean handover document now: system overview, accounts, credentials ownership, known risks. You need this whether the buyer keeps them or not.
- Confirm that every repository, cloud account, and domain is owned by the company, not by the advisor or their firm. Buyers check this, and it is the most common reason closings slip on the technical side.
The technical diligence timeline gives a sense of how quickly the requests arrive once the buyer's team starts.
What a fair arrangement looks like
In the cases I have seen go smoothly, the pattern is the same. The advisor is told early and kept under confidentiality. Diligence support is priced as a separate, scoped fixed fee. Equity terms are known and unchanged, with no last-minute requests to rewrite vesting. The engagement ends at closing or on a set date shortly after, with a written handover. If the buyer wants the advisor to continue, the buyer contracts them directly.
The arrangements that go badly are the ones where nobody read the agreement until the buyer's lawyers did, the advisor finds out about the deal from the data room requests, and the extra work turns into an argument about money in the last week.
How I handle it
The clause I suggest adding to any fractional agreement covers change of control: diligence support at a fixed, pre-agreed fee, a defined handover, and an end date tied to closing. Any equity terms should be written so neither side is surprised. The details are on the pricing page. If you are heading into a sale and want a view on how the technical side will look to a buyer, the technical teardown is a reasonable first step, or book a call.
FAQ
What happens to my fractional CTO's contract when my startup is acquired?
The agreement's termination and notice terms apply unless they say something specific about a change of control. Most do not, so agree diligence support, an end date, and handover in writing as soon as the letter of intent is signed.
Does a fractional CTO's equity vest when the company is sold?
Only if the grant includes acceleration. Single-trigger acceleration vests on the sale; double-trigger requires the sale plus termination of the role. Many advisor grants have neither, in which case the deal terms decide what happens to unvested equity.
Should I pay my fractional CTO extra for acquisition diligence?
Usually yes, because diligence is a workload spike the retainer was not priced for. Agree a scoped fixed fee before diligence begins rather than billing extra days afterward.
Can the buyer keep my fractional CTO after closing?
Yes, but that is a new engagement between the buyer or combined company and the advisor, with its own scope, rate, and end date. Do not commit the advisor to it yourself.