Views on Acqui-hire?

January 08, 2022

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Los Angeles, CA, USA

Wondering if anyone in this network has been a part of an acqui-hire (either as an acquirer or acquiree)? We are growing, and I am looking to solve a gap in my org. chart. I am considering various options, including acqui-hiring.

This strategy has been utilized in the tech world, and I am wondering how the valuation of an intangible (employees) vs. a CF or real-asset-based company would work? Also interested in the cultural and operational integration lessons.

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Reply by a searcher
from Northwestern University in Tampa, FL, USA

I think culture integration can be a major risk with this approach. Depending on how many employees you are bringing in from the target, what % of your total workforce that represents, etc. Would you have the opportunity to interview every employee in advance? If not, are you comfortable with just bringing an entire team you don't know into your current operation? Particularly in the scenario described above where you have an underperforming business - I'd assume some of that is attributed directly to the talent / culture at that company.

It might seem like a shortcut to fill some talent needs, but you may just be trading the pain of recruiting for the pain of significant post-merger integration challenges, including turf battles between new and existing employees, poor culture fit, and some higher than normal turnover.

Reply by a professional
from Dartmouth College in Los Angeles, CA, USA

I've worked as an attorney on a number of acqui-hires. In your situation I would only consider it if a founder or management team is insisting on it to come on board and you are able to attribute as much of the purchase price into motivating the new hires vs paying for their existing company. Investors in companies being acqui-hired have become much more wary of being screwed over in this context so it has to be handled the right way.

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