What is acqui-hiring?

Acqui-hiring is when a company acquires another business primarily for its employees. The name comes from combining the words “acquisition” and “hiring” to describe the transaction. It’s a talent acquisition strategy that’s especially popular in the tech space. A tech company that’s performing well might acquire a startup that’s struggling to get its star programmers on board. While all of the company’s assets come with the deal, the main focus is the talent.

Pros of the acquisition hire strategy

The company doing the acquiring may gain a lot from the deal. Here are some pros:

• Fast hiring: By acquiring a company, you can gain a large number of employees who are already working. They know the product and industry well, so the transition is faster than normal. This can be helpful if you’re expanding quickly.

• Large-volume hiring: It can also be an effective option if you want to expand your team quickly. This strategy might be more cost-effective than hiring lots of candidates individually, especially if you need highly skilled employees.

• Top talent: There’s often a lot of strong talent working in startups. If doing your research helps you find a company with needed talent in your industry, you could add those skills to your team.

• New skills or perspectives: Employees from different backgrounds can fill in the talent gaps in your current staff. They may also inject new perspectives and ways of doing things into your company.

• Established team dynamics: Since the new employees have worked together, they likely already have bonds and know how to function well as a team. You might get better results from them because you can skip the getting-to-know-you phase.

If you have a smaller company that a larger organization might want to acquire for your talent, you could also receive benefits, including:

• Avoiding bankruptcy: Newer, small companies might struggle with financial issues. By selling, you could get the cash you need to pay off your debts and move on to a fresh start.

• Maintaining the team: When another company acquires your entire team, it can allow employees who’ve built bonds and enjoy each other to continue working together.

• Protecting investors: You could keep your investors happier if you have a solution for your startup issues.

• Providing new opportunities for employees: Your current staff might have access to better resources, improved compensation packages and new challenges with the acquiring company.

Cons of acqui-hiring

High-volume hiring aside, acqui-hiring can also comes with some negatives for the buying company. These could include:

• Need for capital: This strategy is often only available to larger companies with enough capital to buy out another business. If you’re a small organization, you may find traditional hiring methods more practical.

• No guaranteed hires: Employees from the company you acquire may not stay on after the transition. They may decide yourcompany culture, structure or other details aren’t a good fit for them. In some cases, the original owner of the acquired business might start another company or go to work for another firm and bring some of their former employees with them.

• Friction among employees: If you don’t handle the acquisition strategically, you could create a divide between your existing employees and the newly acquired talent. The new employees may feel left out, or your current employees might feel you’re favoring the new hires or giving them better perks. Having a plan to integrate your new staff members can help ease these issues.

• Less talent than expected: You might find the acquired team doesn’t have the skills or experience you need as you expand.

The company being acquired can also experience some negatives related to the move, including:

• Loss of control: You could go from being the business owner to being an employee working for a larger company. You might lose any say over what happens to your former employees and your products.

• No employment guarantees: Not all of your current employees may be offered a job. The acquiring organization could decide they don’t need everyone, or some employees might not meet the hiring standards of the company.

Acqui-hiring process

The acqui-hiring process can differ in each situation. However, most companies go through several key steps during an acquisition hire deal. These can include:

1. Building a legal team. An acquisition should be structured strategically to maximize tax benefits and make the deal as beneficial as possible.

2. Seeking approval. Theboard of directors and stockholders of the acquiring company may need to give their stamp of approval before the process can move forward.

3. Detailing the deal structure. The way you structure the deal can affect your tax benefits, how fast the acquisition occurs and how the transition happens. Your legal team can help you structure it to your advantage and avoid potential issues.

4. Determining the offer. Acqui-hiring purchases often base the offer amount on a per-head rate, and the price per employee can vary significantly. This step may require negotiations to come up with a number that both parties agree on.

5. Settling any liabilities. You might assume the liabilities of the acquired company once the deal closes. Outstanding debts, unpaid taxes and other monies owed could become your responsibility. Work with your legal counsel to ensure you handle these liabilities appropriately.

6. Creating a talent plan. You’ll need to assess your hiring needs and the positions you’ll create after the acquisition. Employees from the purchased company typically go through an interview process and aren’t guaranteed a position. Establishing your hiring criteria for each position and developing an interview process can you help determine which employees will have a spot on your team.

7. Reviewing compensation packages. Offering increased salaries, retention bonuses and more perks may sweeten the deal for employees from the company being acquired. Your compensation package could increase the number of employees who accept an offer to work for your organization.

8. Incorporating the new talent. Having an onboarding plancan help you train and integrate your new and existing teams.

FAQs about acqui-hiring

How can you make the acqui-hiring process easier for employees?

Creating a welcoming,positive work environment can help make the transition easier. Prep your current staff and put their minds at ease about their role as the newcomers enter the workplace. When they feel confident in their roles, they can be welcoming to the new staff. Getting to know the new employees can help them feel connected. Ensuring the new hires have the resources they need and touching base with them regularly after the transition can also help.

What is the difference between a traditional acquisition and an acquisition hire deal?

The main difference is the intention behind the acquisition. In traditional acquisitions, the buyer wants the client base, products or assets of the company it’s acquiring. With acqui-hiring, the main purpose is getting the acquired company’s talent. The buyer may not care at all about the other assets of the company.

Why would a company agree to an acqui-hiring deal?

Companies acquired through this type of deal might be having difficulties. Letting a competitor take over the company can be better than simply closing the doors. It could also benefit the company’s employees. Instead of suddenly leaving them without a job, they could have the option of working with the new organization.