What You Need to Know About Acqui-Hires

In the fast-paced business world, companies constantly look for innovative ways to grow, evolve, and stay competitive. One strategy that has gained traction in recent years is the acqui-hire. This approach is particularly common in the tech industry, where the demand for top talent often outstrips supply. But what exactly is an acqui-hire, and why is it becoming such a popular option for companies looking to scale quickly?

In this blog post, we’ll explore the key details of acqui-hires,  provide examples of how they’ve been used effectively, and discuss the ways a business can develop a successful strategy for acquisitional hires.

What are acqui-hires?

An acqui-hire is a type of acquisition where the primary goal is to obtain the talent of the employees rather than the products, services, or other assets of the acquired company. Essentially, a company is hiring an entire team of skilled professionals entirely by purchasing a smaller company.

This strategy is often used when a company wants to quickly onboard a team with specific skills, knowledge, or expertise. The idea is that it is more efficient for an organization to acquire needed talent through this method compared to directly recruiting or utilizing a talent agency.

Why do companies pursue acqui-hires?

The rationale behind acqui-hires is straightforward: finding and recruiting top talent can be incredibly challenging, especially in highly competitive industries like technology. By acquiring a company, the hiring firm can bypass the lengthy and uncertain process of traditional hiring and gain immediate access to a cohesive, well-functioning team. This is particularly valuable when a company needs to quickly scale its operations or enter a new market.

In addition to acquiring talent, businesses may also be interested in the company culture and workflow the acquired team brings. The cohesiveness and harmony of an existing team can be more valuable than the sum of its individual members. This makes the acqui-hire model an attractive option for companies looking to maintain momentum in a fast-moving industry.

Examples of Acqui-Hires

Acqui-hires have become increasingly common in the tech industry, where the race to secure top talent is fierce. Here are a few notable examples:

• Facebook’s Acquisition of FriendFeed: In 2009, Facebook acquired the social media aggregator FriendFeed. While the service itself was eventually shut down, the acquisition was largely driven by Facebook’s interest in bringing on board the talented team behind FriendFeed, including co-founders who had previously worked on Google’s successful products like Gmail and Google Maps. This acqui-hire allowed Facebook to strengthen its own engineering team and continue its rapid growth.
• Google’s Acquisition of Slide: Google’s 2010 acquisition of Slide, a company specializing in social media applications, was another high-profile acqui-hire. While the Slide products were eventually discontinued, the acquisition allowed Google to bring in Slide’s founder, Max Levchin, and his team. Levchin, who was also a co-founder of PayPal, provided Google with valuable expertise in the social media space.
• Twitter’s Acquisition of Periscope: In 2015, Twitter acquired Periscope, a live video streaming app, which was largely considered an acqui-hire. The app itself was integrated into Twitter’s platform, but the primary motivation for the acquisition was to secure the talented team behind Periscope. This move helped Twitter enhance its live streaming capabilities, a feature that has become increasingly important in social media.
• Apple’s Acquisition of Lala: In 2009, Apple acquired the online music service Lala. Although the service was shut down shortly after the acquisition, Apple’s real value was in the Lala team’s expertise in music streaming technology. This acqui-hire laid the groundwork for Apple’s future music initiatives, including the development of iTunes Match and Apple Music.
• Microsoft’s Acquisition of Groove Music (Formerly Zikera): In 2016, Microsoft acquired Groove Music, a streaming service formerly known as Zikera. The service itself was eventually discontinued, but the acquisition was primarily an acqui-hire. Microsoft was especially interested in bringing on the talented developers behind Groove Music to strengthen its music-related software and services. The team’s expertise played a role in the development and enhancement of Microsoft’s music initiatives within the Windows ecosystem, including its integration with the broader Microsoft product suite.

What to Expect in an Acqui-Hire

When exploring the possibility of acqui-hires, there are several key aspects to consider:

• Integration into the New Company: The primary goal of an acqui-hire is to integrate the acquired team into the acquiring company. This process can vary greatly depending on the size and culture of the acquiring company. In some cases, the acquired team may be allowed to operate independently within the larger organization, while in other cases, they may be fully integrated into existing departments.
• Retention Packages: To promote employee retention, companies often offer incentive packages to key talent, which may include bonuses, stock options, or other incentives designed to keep employees engaged and motivated. Parties on both ends of the deal should carefully review the terms of these packages to understand any conditions or time frames attached to them.
• Cultural Adjustment: Joining a new company, even through an acqui-hire, often involves a cultural adjustment. The acquired team will need to adapt to the new company’s culture, values, and ways of working. This can be a challenge, especially if there are significant differences between the two companies. To avoid culture clash, it’s important for both sides to approach this transition with open communication and a willingness to adapt.
• Product and Project Alignment: In many cases, the products or projects that the acquired team was working on may be discontinued or significantly altered to align with the acquiring company’s strategic goals. This can be a difficult adjustment for team members who are passionate about their work, but it’s an important part of the integration process.
• Career Growth Opportunities: An acqui-hire can open up new career growth opportunities for employees. Being part of a larger organization may provide access to resources, mentorship, and career paths that were not available at the smaller company. Employees who are able to successfully navigate the transition can find themselves in a strong position to advance their careers within the new organization.
• Uncertainty and Transition: Like any major business change, acqui-hires can come with a degree of uncertainty and transition. Employees may have concerns about job security, changes in job roles, or shifts in company culture. Open communication and transparency from leadership can help alleviate some of these concerns and make the transition smoother for everyone involved.

Develop a Winning Acqui-Hire Strategy

Acqui-hires represent a unique and increasingly popular strategy for companies looking to acquire top talent quickly and efficiently. While they come with their own set of challenges and considerations, the potential benefits can be significant for both the acquiring company and the acquired team. By understanding the dynamics of an acqui-hire and knowing what to expect, both parties can navigate the process successfully and come out stronger on the other side.

If you’re part of a company considering an acqui-hire, it’s important to approach the situation with a clear understanding of the potential benefits and challenges. With an effective strategy, an acqui-hire can be a win-win situation that sets the stage for future growth and success.