How does it work when a public company acquires another public company? If you have existing LinkedIn shares, do they get converted to Microsoft shares?... or do they just disappear one day, and a pile of cash takes its place?
In this case, the deal was structured as all cash. So the latter is exactly what happens. One day in your brokerage account you will see $X for every Y shares you had.
What about employee equity? Especially unvested options or stock units?
That depends if the sale is for cash, stock, or a mix. Could be either or both of the alternatives you lay out.