A year ago, Ixigo had acqui-hired a mobile content sharing app named Reach. In simple terms, this can be inferred as an intelligent strategy by Ixigo in which it combined the expertise of Reach with its own.
“By definition, acqui-hiring refers to buying out a company or an entity primarily for the skills and expertise of its staff, rather than for its products or services. Acqui-hiring is facilitated by acqui-sourcing, the process of identifying companies that agree to be acquired.”
Acqui-hiring can be termed as a smart way of enhancing the parent company's talent pool - a quick and comparatively easier route of adding certain skill sets which match up to the end goal of the company. Quite common in VC-backed startup companies, especially within the competitive technology sector; acqui-hiring strategy has been adopted by big corporations like Facebook, Twitter, Yahoo, and Google.
Advantages of Acqui-Hiring
- Brings right talent pool to the company
- Improves operational efficiency
- Saves time and effort to find new talent
- Leads to the acquisition of the pool of existing customers tied to the company being bought
A palatable amalgamation of talent and skills, acqui-hiring has many advantages which help solve some challenging issues with ease. Some of them are:
- It solves the challenge of finding the right set of talent. It is one of the fastest ways of hiring good volume with cutting-edge skills by recruiting talent from other smaller firms and combining the expertise into one firm. Urban Ladder, Swiggy and RailYatri are apt examples of this kind of smart strategy.
- It improves operational efficiency and enhances user experience. YatraChef, a technology start-up in the transit food delivery space was acqui-hired by RailYatri recently. They now look forward to bringing in performance excellence by spanning their reach farther in a very short time.
- There’s a huge scope of saving effort and time by using this new age strategy. If you have plans to expand your startup, you may need to hire a set of people, interview them and go through the rigorous evaluation and selection process. Also, getting the new hired trained for the role involves much more cost, time and effort. An acqui-hire eases out such challenges and one can get a fully functional team at one go.
- In some cases, acqui-hiring is a great way to remove competition for the firm that is buying out the smaller firm. This also sometimes provides access to a pool of customers of the acquired company. And in few cases, this can also be a bidding strategy for cash-strapped founders who do not have any choice but to sell their firm to the bidders and make an exit.
What needs to be taken care of during acqui-hiring?
Facebook had once bought Glancee (a location sharing app company) and then killed the app. However, it had kept the engineers who had built the app and then assigned them to other projects in Facebook. Though there may be many advantages of this strategy, in an acqui-hire deal if the business goals of both the companies are not aligned, then such mismatch can lead to grave issues for both the entities.
Apart from the alignment of business goals, there are other major aspects which need to be taken care of such as:
- How to structure the deal
- The post-closing liabilities and how the purchase impacts your board of directors
- If the companies' creditors receive payments owed, the potential tax questions
- How shall the company compute the exact and fair value for an Acqui-Hire?
The human elements that call for attention
Acqui-hiring many a time makes perfect business sense and serves a great purpose. During the time when Google was developing a social media service called Orkut to rival Facebook, they didn’t head-hunt the best person for the job. Rather, they scooped up Digg founder Kevin Rose and a number of his employees at Milk and bought Milk to boost Google+. However, there is a human element involved in all such types of strategies and transactions.
“One must not undermine the human issues that realistically need a lot of time, effort and right cultural strategies to deal with by the business and the HR leaders.”
However, such strategies may not always succeed and the business owners must take into account the pros and cons of their strategic moves. The above example of Orkut is a classic example of this. Despite being in the Google platform, Orkut lost to Facebook, which was quite new at the time when Orkut was in vogue. But almost all the Orkut users shifted to Facebook, a relatively new entrant in the world of Social Media at the time.
Issues that need to be taken care of with the acqui-hiring strategy
- Working out how the new employees will be compensated in a way that keeps existing employees happy and the tax authorities at bay.
- What proactive measures shall be taken to manage the emotional turbulence of the new set of employees?
- Defining career paths in a way that they are congruent to the need of new and existing employees.
- Seeking legal advice to prevent board members from potential claims post the acqui-hire.
- How will the culture transformation happen? The founders of the acqui-hired company also lose their exalted status and become one among equals. This transition needs to be handled well.
Though acqui-hiring generally refers to acquiring skill sets of the smaller firm, it is more than just that. It is about acquiring the culture of the new firm and the working style of the acqui-hired firm. All these are not as simple as it seems. The complexity needs to be handled, integrated and managed well so that the acqui-hired firm continues to do business as usual and becomes more enriched.
Know more about such trends at the People Matters Talent Acquisition League Annual Conference 2018 on 30th May which will seek to address the most poignant talent acquisition challenges, what’s next in TA, and how AI and machines are becoming matchmakers for recruiters today.