What is acquihire?
An acquihire is when a company buys another company primarily for its employees instead of acquiring the company for its products or services, or its financial assets. The term Acquihire is a combination of the words 'acquisition' and 'hire'.
A successful acquihire can involve the hiring of key personnel, while it may also be used to hire entire departments or an entire company. An acquihire is often done in order to gain access to a certain kind of expertise or skill set that might not otherwise be available.
Acquihires are mainly used by large companies looking to scale quickly and fill up talent demands. Since the employees already have experience working together as a team, it would be easier for the buying company to manage them. This also helps companies avoid the hassle of finding and hiring individual employees as they are hiring the entire team. Let's understand more about an acquihire.
Acquire vs Acquihire
Acqui-hiring is when a company acquires another company primarily for the talent or expertise of its individual employees.
Acquire is when a company purchases the assets, intellectual property, rights, or shares of another business.
How do businesses structure acquihire deals?
Even though each deal is different, many of the acquihire agreements are light on terms because the true value lies with the employees, not with the company or the product. Most of the purchase price is set aside for employee benefits, such as retention packages.
The buying company usually pays a fixed amount per employee or per engineer acquired. Typically, it's at least a few hundred thousand, and sometimes even as much as $2 million for a single employee. Payment could be made in cash, stock, or a combination of both.
Acqui-hiring is most common in the tech industry, where large companies such as Microsoft and Google hire smaller companies. Many of these companies acquire other companies in order to hire the best talent and to improve their products or to acquire expertise in a certain field.
As an example, Apple acquired AuthenTec in 2012, which gave rise to Touch ID and the iPhone's fingerprint scanner. Below are more detailed examples of acqui-hiring in the tech sector.
In 2009, as Facebook's growth began to take off, it acquired FriendFeed, an innovative service for sharing online. After the merger, former high-profile Google employees joined Facebook, including Bret Taylor, who became Facebook's chief technology officer. By March 2013, Facebook accounted for 12 talent acquisitions over its past five quarters.
In July of 2021, Twitter, a popular social networking platform, announced that it has acquihired the team from the news aggregator app Brief. Founded by former Google engineers, Brief offered a subscription-based news summary app that aimed to tackle many of the problems of today’s news cycle.
The startup team would join Twitter’s Experience.org group where they’ll work on areas that support the public conversation on Twitter, including Twitter Spaces and Explore.
In 2012, Google was working on creating a new social platform to compete with Facebook and Twitter. Instead of hiring new employees, Google had acqui-hired Milk, an app idea lab. The major reason for this acqui-hiring is to scoop up Kevin Rose, the iconic entrepreneur and founder of Digg.
Google essentially bought the company only to shut it down later, and keep the team members. Kevin Rose and his team were instead put to work on Google+, a social media platform developed by Google.