Acqui-hire transactions (also referred to as talent acquisitions) are, essentially, situations in which businesses are bought primarily for the talent they hold (as opposed to the assets or cash flow streams that the business owns). Therefore, when a business is acquired, the employees are effectively hired on to the acquiring company. This transaction type is often used when acquiring companies are not as interested in the products or services offered by the acquired company as is the case in typical M&A contexts. In many cases, the acquired business is eventually discontinued.
Benefits for Acquiring Companies
Receiving a talented and already-experienced pool of talent can grease the wheels for a successful future enterprise, after the transition period in which you place the right employees in the right seats. You not only get talented employees, but you can often obtain a cohesive and synergistic team.
Challenges for Acquiring Companies
One major challenge that acquiring companies experience when acqui-hiring is finding that many employees they hoped to bring over are simply disinterested in joining a more corporate environment. This can be combated by offering robust and lucrative retention packages and benefits that the startup firm may not have been able to offer.
How Are Acqui-Hire Transactions Structured?
Many of the same considerations companies involved in a routine M&A must address also apply to acqui-hire transactions. Price allocation must be handled appropriately in talent acquisitions; stocks and assets are often used in these types of exchanges. Largely, though, agreements for acqui-hire transactions are not heavy on the items that bog down other M&A transactions (e.g., representations, warranties, etc.) – the buyer and seller know that the talent is what is being sought.
Where Has Acqui-Hire Been Used?
An industry that frequently engages in acqui-hire transactions is the tech industry; Silicon Valley is a common setting for these types of acquisitions. Facebook’s Mark Zuckerberg has made great use of acqui-hire transactions, as has Google and Apple. This occurs largely due to the relative scarcity of premium tech talent.
Conclusion
Even though an acqui-hire feels like it’s not the same as regular M&A, it’s still imperative to consult with a knowledgeable business attorney who understands the legal risks and nuances of these talent acquisitions. For example, you need to ensure that all post-merger liabilities are addressed and the board of directors are protected from potential claims.
Doida Law Group is well-equipped to ensure your company’s next acqui-hire transaction goes smoothly and generally achieves your business goals. We offer a unique and innovative billing structure we refer to as “fixed-fee;” this is designed to give clients more certainty about cost and establish a positive working relationship. Interested? Reach out to us today so we can discuss how we can provide value for your company.