Acqui-hiring is short for acquisition and hiring, simply put, acqui-hiring is when a company takes over another company for the sake of its employees rather than the product or services offered by them. It is characterized as an optimal way of adding value to the parent company and enhancing its performance. Acqui-hiring generally takes place when a certain skill-set is high in demand, for instance, cybersecurity and cloud computing. It is termed on the parent companies’ requirements and holds either a competitive advantage for them or offers employees that align with the companies’ goals. Products and services offered by the companies are often discontinued by the acquirers and their employees are assigned to various other departments in accordance with the parent company’s needs. Startups are more inclined towards getting acquired by industry giants owing to their talented pool of employees, especially the minds behind conceptualization and technology. Many startups fail to stay afloat financially and acqui-hiring comes to their aid.
Acqui-hires are super cosmetic in nature as the employees get bonuses, investors get a significant return and the parent company gets the desired talent to carry out their functions. This strategy originally formed because tech giants had restrictions against hiring each other’s employees as part of No-Poach Agreements. However, the quality of talent available in startups is extraordinary and is desired deeply by large corporations. These individuals are recognized to be driven, flexible, calculative, and extremely focused, which are the prime qualities required in any employee.
Advantages of Acqui-hiring
Acquisition of desired talent
It is a fast way to hire employees with proven track records that are compliant with each other. Acquiring a startup also gives the acquirer an additional plus of hiring talented individuals who are flexible enough to think outside of the box and bring creative solutions to the table. However, these individuals are not exactly modeled to work for large corporations because of the restricted environments. The acquirers through acqui-hiring get to employ such individuals on their terms. Another big plus compared to traditional hiring is that through acqui-hiring, corporations get to recruit the entire team. This team does not require to develop collaboration or cooperation skills and can successfully operate in harmony.
An innovative mix of employees
Since most of the acquisitions are of startups, the trend is to get the innovators on board. This way corporations not only get their existing ideas but also their insights on all the upcoming projects. Acqui-hiring involves the entrepreneurial head of the company to join the acquirer as well which works perfectly for them. The parent company gets to use their ability in the management of their newly acquired employees and the entrepreneurial heads get to work with their selected set of employees and work on spreading their ideas to a larger audience. Startup employees are also considered ideal because of their willingness to work for long hours with minimal resources.
With strategic and planned acqui-hires, corporations can significantly improve their operational efficiency and user experience in a very short span of time. Acquirers when taking over any company are focused on their employee base but also look for companies compatible with their business structure. An additional benefit of finding the right fit for their company is that they can not only use their resources but also intensify their functions to match the level of their own corporations. This enables them to create an extension in a considerably short amount of time with an employee base that specializes in the field and has a proven track record. Acqui-hiring can also prove to be an excellent way to remove competition by buying out a smaller firm. This will increase the operation efficiency three-fold as the acquirer also gets a hold of their client base.
Saves effort and time
Acqui-hiring is the best strategy when it comes to expansion. Generally, if a corporation is looking to expand they will need to go through the normal channel of recruitment which includes selecting individuals for various roles, evaluating them accordingly, and training them as per their roles. This process can be very time-consuming, tiresome, and expensive. Acqui-hiring eases out the challenges posed by traditional hiring, saving a corporation’s time, effort, and money. Also, you will be cashing in on the experience the team brings in.
However, as appealing as it may sound, acqui-hires can be stressful and challenging for the employee base of the company getting acquired. It is important to keep in mind the human factor associated with organizations. Employees face a major challenge in accepting the transition. To help ease this process it is necessary for both the companies to encourage and incentivize the employees. Well designed compensation packages, increased resource base, and various other employee benefits can go a long way in mitigating their fears. Although it is easier for employees working with startups to get through as they are aware of the possible outcome of a larger firm buying them out and can also serve as a blessing to them. Acqui-hires can help save the employee base of a failing startup from unemployment, debts, and reputational hazards.
Role of recruiting authorities
Recruiting authorities of the acquirers play a key role in the whole aqui-hiring process. They are the ones who translate the opportunity into actualization. Recruiting authorities make sure the executives are comfortably on-board with their ideas and then engage in looking for businesses which will best suit their requirements. Once they have selected their prospects, they showcase them to the executives to further engage them into the process. Once a prospect is finalized, the recruiting authorities along with the financial team design the offer. Once the formal proceedings begin with the acquiree, recruiting authorities shift their focus to developing a set of criteria for analyzing the acquiree’s workforce to assess the talent quality they have to offer.
Post finalizing on an acquiree, the recruitment authorities get into the recruitment process of new employees. They work out compensation packages offered to new employees, all the while making sure not to offend their existing employees and keeping a check on their taxation policies. They help in devising measures to manage the emotional turbulence of the new set of employees and a way to channelize their energy towards productivity. Since an acqui-hire process brings in most of the employees of a firm, it also brings in with them their culture and working style. It is the duty of recruiting authorities to make sure their transition to the culture and work environment of the acquirer is comfortable and handled with care. They ensure the existing employee base is compliant towards the new employees and a positive work environment is in place.
Recruiting authorities also take note of the legal procedures involved with the acqui-hiring and ensure smooth acquisition.
Acqui-hiring in COVID-19
As observed from previous economic crises, acqui-hires increase significantly during and post a crisis. A similar surge is expected in 2020 as the world’s economy lay crippled in the wake of COVID-19. The pandemic has significantly increased digitization leading to an enormous gap between demand and supply of tech labor. This has led to various organizations looking to acquire talented individuals in the field of cybersecurity and cloud computing. Many organizations are looking at this as an opportunity to acqui-hire a security firm or startup to optimize their overall security.
This is a challenging time for startups as the market is ravaged and there are fewer opportunities, but acqui-hiring could be the best possible strategy for them to survive in this recession. COVID-19 has created various paradoxes in terms of what can be the future of startups. In a time where companies are actively realigning their workforce to better suit the “next normal”, acqui-hiring can come in quite handy. Organizations looking to acquire need to focus on various factors to ensure effective results-
Reviewing workforce strategy
Organizations need to review their employee base, determine the shortcomings, and strategize to identify and fill their job roles. The challenges that come with hiring during COVID-19 need to be tackled strategically. The hiring and acquisition process will also have to be performed virtually, restricting acquirers’ field of vision significantly. Recruiting authorities need to competently work towards identifying the gap between demand and supply of the workforce required by the acquirer and plan a move in accordance with the availability of resources.
Determine buyout amount
The general structure for an acqui-hire buyout is two-tired. The first tier is used to acquire the firm in the form of cash or stock. This tier is also used for compensating the investors and shareholders. To determine the first tier amount it is necessary to keep tabs on the finances of the acquiree. It is a key factor in the time of COVID-19 because most of the firms are not doing so well and can settle for a cheaper price than they initially would have. The second tier is compensation for the employees, it is advisable for organizations to use up the saved amount from tier one to better compensate the employees in tier two. Investors, share-holders or non-hired employees are not eligible for this tier, hence, the prime benefactors would be the employees targeted by the acquirer. It is also important to remember that there can be defections, which is why it is necessary to keep long-term benefits in the employee proposals to incentivize them.
Allocation of funds
Since an acqui-hiring is primarily concerned with getting the employee base of the acquiree, it is important to allocate more funds to the second tier. Investors and stakeholders will want to bag more funds and pressurise into allocating more to the first tier. During this time it is important to position yourself in a way that is to your strategic advantage.
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