An acqui-hire occurs when one company acquires another company solely or primarily for the purpose of snagging the employees of the acquired company. Many tech startups use the acqui-hire strategy to bring in entire teams of talented, skilled employees that are ready to work together in collaboration.
The acquiring company is typically the one to initiate an acqui-hire, but that’s not always the case. A startup whose business plan involves being acquired usually focuses on developing a product or service worth acquiring. Those aren’t the only assets they have, however. A startup that isn’t making money and needs an acquisition should consider the possibility of buyers who might be interested in the employees. Typically the contacts to make this sort of deal begin with engineers from the two companies initiating discussions, but venture capitalists can also make the initial connections.
Both companies can benefit from an acqui-hire. The company making the acquisition gets a fresh burst of energy and ideas because of the influx of new talent. They often get this benefit without having to spend much, since they’re essentially purchasing talent rather than hard assets like real estate. Usually the amounts involved are far less than the acquiring company would have to pay to establish a new branch, and they can speed the process of getting a new project off the ground because they have a team that knows how to work together.
The company being acquired can also benefit, especially financially. Many startups are inadequately capitalized when they launch, and many entrepreneurs don’t have the business experience to help a startup grow. Being acquired by a larger company can come as a relief, especially financially. In addition, running a company that’s the subject of an acqui-hire is seen as a positive move and a mark of success. The employees involved also benefit because they receive some job security and often financial incentives as well.
Both startups and acquiring companies can benefit from the unique talent-focused acquisition involved in an acqui-hire.