What Does Acqui-hire Mean?
Acqui-hire is a portmanteau of acquisition and hire. A relatively new term in the startup industry, it refers to the practice of acquiring a company as a means of hiring that company’s employees. The target company’s product is relegated to a secondary position as a motivation for the transaction.
Acqui-hiring saves money and time. It’s a shortcut to getting a large number of qualified employees in a short time and without having to go through a rigorous one-by-one recruitment process. The employees are already accustomed to working together as a cohesive unit. Acqui-hire is popular with global corporations.
The company targeted for acquisition is often in financial distress so the transaction allows them to recover some money for investors before shutting down.
The process for an acqui-hire ordinarily involves:
- Obtaining legal advice.
- Getting approval from stockholders and the board.
- Structuring the acquisition deal.
- Researching and assessing liabilities and tax implications post-merger.
- Arranging compensation for new employees and arranging the termination of departing employees.
- Ensuring creditors’ demands are taken care of.
- Integrating the new employees into your current team.
There are no hard rules on acqui-hires. The transaction is typically thin on terms, Often, a combination of assets or stocks will change hands. However, much of the transaction value will go to employee benefits such as retention and termination packages. The acquiring company will often pay a fixed amount for each employee.
It’s not a given that every employee of the acquired company will join the acquiring business. There will often be an interview process for all employees to gauge their viability. Where an employee is onboarded, there is no guarantee that they will stick around for the long haul.