Here’s Everything You Need To Know About Acquihire

What Is Acquihire?

Acquihire is a business phenomenon under which a company is acquired with the primary aim of acquiring its skilled personnel rather than its products, services, or intellectual properties.

This strategic move is particularly common in technology companies and startups, where competition for top-tier talent can be fierce. By acquihiring a company, the acquirer gains a pool of skilled and experienced professionals.

What Are The Advantages Of Acquihire?

Acquihiring is an attractive strategy for businesses seeking to bolster their talent pool and innovation potential. For starters, the move offers a streamlined way to recruit skilled professionals, who are already accustomed to working together as a team. This can lead to a quick integration, reducing the onboarding friction.

Additionally, the acquihiring strategy can help the acquiring company rapidly expand its expertise in a specific domain or technology, accelerating its time-to-market for new products or services.

How Do Businesses Structure The Acquihire Process?

This can vary depending on the specifics of a particular situation. Typically, the deal involves acquiring the entire company or a substantial portion of it, including its workforce. The financial terms often encompass both a cash component and incentives to retain key employees.

Equity grants, performance bonuses, and retention agreements may be employed to ensure that the talented employees remain with the acquiring company.

What’s In It For Employees?

For employees of the acquired company, the move can present a unique opportunity. They often receive offers to join the acquiring company’s workforce, where they can contribute their expertise and collaborate with a larger team.

While some employees might see this as a positive change for growth, others may have reservations about transitioning to a new company, particularly if they were deeply invested in the culture of the company that is being acquihired.

What Is Soft Landing?

Soft landing means a scenario where the acquired company and its employees are treated with care and respect throughout the acquihire process.

The acquiring company takes steps to ensure that the transition is as smooth as possible, often by offering support services, providing guidance on integrating into the new work environment and addressing any concerns or uncertainties that employees may have.

What Are The Disadvantages Acquihiring?

While acquihiring presents numerous benefits, it is not without its drawbacks. One potential disadvantage is cultural misalignment. The culture of the acquired company and the acquiring company could differ significantly, leading to clashes in values, work style and priorities.

Moreover, some employees might be resistant to the idea of leaving their current workplace, potentially resulting in attrition rather than retention.

Why Does Acquihiring Happen?

Acquihiring occurs for a variety of reasons. One common scenario is when a startup has developed a talented team but struggles to gain traction with its products or services. In such a scenario, larger companies see an opportunity to harness the potential of the available pool of talent by retaining it.

Acquihiring also occurs when companies want to rapidly scale their workforce, without undergoing the traditional hiring process.

How Do Companies Decide The Value At The Time Of Acquihiring?

This can be a complex endeavour. Unlike traditional acquisitions that often involve assessing the value of the intellectual property, customer base, and revenue streams, acquihiring primarily focusses on talent.

Valuation may take into account factors such as the experience, skills, and potential contributions of the employees being acquired, along with the strategic importance of their expertise to the acquiring company’s goals.

What Is the Difference Between Acquisition And Acquihire?

While both acquisitions and acquihiring involve one company taking over another, their core objectives and outcomes differ. In the traditional acquisition process, the acquiring company aims to obtain the assets, products, customer base, or intellectual property of the target company.

Acquihiring, on the other hand, entails acquiring the skilled workforce of the target company to drive innovation, enhance capabilities, and accelerate growth.