Acqui-hiring occurs when a company buys a smaller company in order to get hold of its staff, rather than its product. This is mostly seen in the tech industry – Facebook, Apple and Google have a big history in it – deals normally exclude any other IP belonging to the company. Acqui-hiring hit its peaks in the early 2010s, though talk of its death is premature – acqui-hiring still happens, albeit often more discreetly than before.
Often a business, normally a startup, is struggling to raise investment, is in financial difficulty, or is losing momentum. The buyer, meanwhile, sees the opportunity to get hold of a talented and effective team (often skilled engineers) without the lengthy, drawn-out process of recruiting individually.
When the buyer takes on all the assets and liabilities, including debt. This route takes the most effort but proceeds for the sellers are taxed at lower rates.
This is when the buyer chooses which liabilities they want and which ones they don’t. The proceeds for the sellers are taxed at lower rates if both parties can prove that the majority of assets will go on and keep running as normal.
The most common type is when the buyer just takes on the employees. Quick and easy, but this leaves the sellers paying normal taxes on the proceeds.
Five steps to acqui-hiring
1. The sellers cast a wide net and speak to corporate development departments.
2. They narrow it down before landing on the right buyer.
3. The term sheet is agreed, outlining the material terms and conditions of the transaction – this often includes the value of each employee per head.
4. The buyer conducts a robust due diligence process.
5. If all is okay, the deal takes place.
This article was first published in Courier Issue 31, October/November 2019. To purchase the issue or become a subscriber, head to our webshop.