06 Apr Acquihire vs. Acquisition
Acquihire is the process of acquiring a company for its talent rather than for its products, services, or earnings stream. Another way of thinking of an acquihire is that it is basically purchasing a team of smart people (often engineers) who have worked together successfully, hoping that they might augment and accelerate the buyer’s business.
Many industries rely heavily on consistently finding the best, proven and most skilled team members. Acquihiring has gained in popularity, as it can be something of a de facto one-stop shopping process that accelerates the hiring process. In some cases, the buyer will not have to retain existing products/services or even continue the operation of the company.
It’s all about the People
Acquihiring is often seen in mature technology companies as well as venture capital backed startups. Many companies see it as a way to quickly acquire proven talent. Acquihiring is increasingly common in the tech sector, where certain types of skill sets, such as specific computer programming knowledge, are hot and in short supply.
Through acquihiring, it is possible for large tech companies, for example, to bypass the potentially long process of finding and vetting new tech savvy employees. Additionally, acquiring provides companies with a degree of proof that a given group of employees work well together and can handle a particular job.
Staying on the Cutting Edge
In other words, by opting for acquihiring, companies can instantly gain an experienced and proven team. Again, in areas involving cutting-edge technology where time is essential, opting for acquihiring can be seen as essential in the process of staying ahead of the competition.
For companies looking to stay at the forefront of their respective industries, the process of acquihiring may be nothing short of essential. It is also common for teams acquired via acquihiring to immediately be put to work developing a new or existing product within a company. So, the talent acquired isn’t necessarily dispersed throughout the new company.
Acquihiring Affects the Fate of Your Company
If you are approached with an acquihiring transaction it is important to stop and ask why and for what reasons? Next, you’ll want to know if you are expected to join the new company as well. Companies interested in acquihiring are usually interested in acquiring the abilities and skill sets of your staff. Also, it is important to note that in an acquihire situation, the acquired company is often shut down. This factor, of course, is far different that it would be in a standard acquisition.
Often acquihiring occurs with companies that are under stress and may go under. Typically, assets are purchased and existing employees are brought over to the new company. Your company usually isn’t being purchased and the corporate structure is frequently left in place for a variety of legal reasons such as liability.
Taking Your Employees into Account
Acquihire situations can be highly disruptive. Your employees will likely be working in a different location, with potentially a different agenda and goals and under different management.
For your employees, a new owner is one thing, but with an acquihiring situation, pretty much everything changes. Many key employees may simply walk instead of making the transition to the new company. If you want an acquihiring deal to go through, it will be necessary to pay careful attention to the responses of your employees.
Likewise, you may discover that your existing customer base may find the disruption a little too much as well. Taking steps to ensure that your employees, and in some cases your clients, are willing to make the move could be essential if you want the deal to go through and be successful. We’ve seen acquihiring from both sides, from the seller’s and buyer’s perspective. Contact us in confidentiality if you’d like to discuss your specific situation.