Finding the top talent isn’t always easy, especially if you’re a company pioneering a new industry. In fact, finding the right people to build their companies has historically been one of the hardest elements for tech companies looking to scale.
Just 10 years ago, finding a team that intricately knew computer science, AI and product building was tough. Finding the best team? Almost impossible.
So to help get around this, a new type of acquisition strategy emerged: acqui-hiring. A hybrid of acquisition and hiring, acqui-hiring allows companies to bring on entire teams in one go, rather than having to find people one by one.
But what exactly is it and how does it work?
What Is Acqui-Hiring
Acqui-hiring is the process of acquiring a company mainly for its people rather than its products, services, customers or profits.
Imagine this: you’re a big tech company looking to build a new product in a niche area. To find the right team would take months of time, not to mention interviews, negotiations, the list goes on.
So, instead of investing time and resources in the process, you identify a company with the right talent and buy the entire company instead. In essence, you’re buying human capital, rather than a company.
And yes, it might sound a little strange to just ‘buy’ a team, but it’s actually a very common occurrence, especially in the big tech world. In most cases, after the company has been acqui-hired, the product it makes will be either shut down or phased out.
Why Did Acqui-Hiring Become A Thing?
A huge driver of acqui-hiring is talent scarcity. In industries like AI, deep tech and quantum computing, access to the right people (and the best people) can actually be a better advantage than buying another company’s product.
When businesses are scaling fast, they don’t want to worry about building a team piece by piece, they want to be able to buy the right group of people and start delivering the product quickly.
This is where acqui-hiring comes into its own.
How An Acqui-Hiring Deal Works
Whilst every deal is different, in general, most acqui-hires follow a similar structure.
First, a company will identify a gap in its talent pool and then look for startups whose teams possess those skills.
Once they’ve found the company, they will discuss a price to acquire them. Unlike regular acquisitions, acqui-hiring deals are priced per employee, rather than on revenue.
Once the deal closes, the acquired team get integrated into the parent company and get building. Many times, they might head up departments or be given incentives to stay. As human capital can be fickle, it’s up to the parent company to not only buy the talent, but keep them engaged.
Why Would Startups Agree To Be Acqui-Hired?
It sounds like a sell out, but acqui-hiring can actually be a great exit strategy for a business. If a startup is stalling and the founders are burnt out, acqui-hiring might allow them to exit with profit, give their teams onward employment and allow their investors to get a return.
For employees, acqui-hiring regularly comes with a bigger pay check and incentives to stick around, which can benefit them too.
Whilst the idea of selling human capital does sound strange, it is a strategy that many companies have completed successfully.
Famous Examples of Acqui-Hiring
Acqui-hiring isn’t just a buzzword – companies have actually used it to grow and scale.
Some examples include:
- Google acquiring Android to boost their mobile team.
- Facebook acquiring Instagram to bring their design over to Facebook.
- Facebook acquiring Whatsapp for its engineering talent.
- Apple buying Beats to benefit from their engineering team.
- Google buying DeepMind to access their world-renowned AI research team.
The list goes on…
Do Employees Legally Have To Stay After An Acqui-Hire?
In most cases no, employees do not have to stay after an acqui-hire. Forced employment isn’t usually part of the process, and employees normally have to sign new contracts as they move across.
As part of this, employees have every right to refuse an offer, re-negotiate terms, salaries and bonuses or just get up and leave. The only thing that they usually do have to do is stick to previously agreed notice periods and non-compete clauses in their contracts.
Why Acqui-Hiring Is So Popular
Acqui-hiring has become popular because it allows companies to access the best talent without having to spend months rooting through CVs and negotiating. It gives businesses a way to move faster with the right team backing them.
But it’s not a fool-proof strategy. Humans can be fickle, and retention is just as much of a challenge as the initial acquisition, if not more.
So, as the right talent becomes harder to find, it looks like acqui-hiring is going to stay a core part of the startup world. But it’s worth remembering: buying talent is easy, but keeping it? That’s when the real work begins.
