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Acqui-Hiring and What it Means for HR Teams

Buying start-up firms to get hold of their employees is increasingly common. Three simple steps will help HR teams decide if it's right for their company

Tech companies are at the forefront of many trends. A combination of founders or senior managers with a sharper understanding of the future than their counterparts elsewhere and a cadre of skilled employees who all want to come up with the next iPhone or Snapchat make for a culture that embraces and quickly makes use of any new idea.

So it’s no surprise that the notion of acqui-hiring has been adopted first by tech firms; the chance to “hack” traditional M&A strategy must appeal to many in the sector. Acqui-hiring is where a small firm is purchased not for its products or customers but so the acquirer can get its hands on the employees and the culture they bring with them.

What is essentially an incredibly expensive recruitment campaign shows how important having the right “talent” has become. Acqui-hiring brings a company employees who are unlikely to seek new positions – and so not appear on a recruiter’s radar – and who come with the right mix of innovative ideas, and processes for turning them into money, that will attract more high-class employees. And, finally, it brings in teams of people who can obviously work well together, not just individual all-stars.

From Silicon Valley…

Facebook has been one of the most active companies over the past three years. It acquired close to 20 companies from 2013–2015 to tap into top mobile and tech talent (see chart 1). Other companies following Facebook’s lead are its peers Twitter, Google and Yahoo!.

Facebook's rate of acqui-hiring over the past two years

Chart 1: Facebook’s rate of acqui-hiring over the past two years  Source: CEB analysis

While the tech sector is leading the way, many other industries are becoming ripe for acqui-hiring themselves. Digitization, globalization, and access to venture capital has enabled entrepreneurs to start new companies in many different industries. Even traditional sectors — such as oil and gas, retail, manufacturing, and pharmaceuticals — have seen a sudden increase in the number of start-ups.

…To the Ruhr Valley?

Heads of HR from any industry – even in industrial heartlands like Germany’s Ruhr Valley – should at least consider whether acqui-hiring is a worthwhile strategy to pursue. Done right, it will expand the number of skilled employees working for the firm and who are more assured of working well together than individuals without prior experience of one another. HR teams should take three steps.

  1. Identify emerging skills in your industry: All industries now require employees with a range of new and increasingly specialized skills, especially knowledge workers. HR teams should make sure they have a clear understanding of the strategic priorities their business unit or firm is working towards, and then work back from there to create prototype job descriptions for the types of role they might need.

    From there, they should look to see where these skills are being developed in different industries and markets (you can always acqui-hire from adjacent sectors – see point 3 in this post) and estimate how in demand these skills will be in your industry in the future to determine whether acqui-hiring is worth the money now, rather than paying over the odds for employees in five years’ time.

  2. Watch for fast-growing start-ups: Successful start-ups have no shortage of ideas or intelligent people but can lack cash and struggle to find funding. So many will see acqui-hiring as an attractive exit strategy.

    HR teams should track venture capital investments in their sector(s) as a way to see where new skills  – and the demand for them – are emerging.

  3. Use data wisely: HR teams must go beyond simply collecting demographic information about future roles and potential employees to fill them, and use measures of performance that will identify the right people to help implement whatever strategy the senior team are shaping.

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