Acquihiring – the concept of hiring a company for its people is a concept that is gaining momentum among large enterprises. The Acquihiring is a sharp contrast to the traditional M&A (Mergers and Acquisitions) which are primarily for products, technology, and revenue.

What does your company do when it finds itself in need of new talent? One option calls for you to identify promising talent already in your ranks and promote from within. That could require additional training, though. Furthermore, you might not have enough time to allow for current workers to get up to speed

Another option is to recruit new candidates, relying on your human resources department and headhunters to source the perfect employees. But that approach may not work so well for you if there has been a talent shortage in your area. Attracting employees from far away will likely involve extra incentives on your part, such as offering a moving bonus and assistance for new hires in finding housing.

And when your quest for new workers extends across borders to other states or even other countries, the search may be less than fruitful because other companies have already hired the best and brightest people currently available in the market.

In such instances, it makes sense to go out and buy an entire company so that you can upgrade your talent immediately, with a lot less effort. Acqui-hiring may be just what your enterprise needs to move forward and expand.

Making a Case for Acquihiring

In the “Hiring through Startup Acquisitions: Preference Mismatch and Employee Departures” report by J. Daniel Kim, MIT, and the US Census Bureau, the authors described the rationale for acqui-hiring in terms of scarcity. “Especially in tight labor markets, firms can hire by acquiring other companies that house high-quality workers. This practice is especially common among startup companies whose most valuable – if not the only – asset is their human capital.”

The report reminds enterprises considering acqui-hiring that, “consistent with this view, Mark Zuckerberg once remarked, ‘We buy companies to get excellent people.’”

Enterprises Obtaining Talent Quickly By Buying Other Companies

Zinnov turned its attention to the task of finding new talented people to strengthen an enterprise’s ranks. “When a company acquires another company (usually a start-up) to get access to its talent with or without its intellectual property; but not for its revenues, customers, or products/services, it is called Acqui-hiring.” It explains that the word “Acqui-hire” combines the two words “acquisition” and “hiring.”

Recent examples of prominent companies using acqui-hiring include Wal-Mart Labs in India, which purchased a Bangalore business-to-business trading platform for wholesalers called BigTrade, to improve its current customer service system.

And Automation Anywhere purchased an engineering company called Cathyos Labs, which is oriented toward automation, developing products, and using analytics to guide innovation of new products to help it expand. So it’s easy to see that there are many options for collecting new talent quickly, to support a new initiative in your enterprise.

Acquihiring is Good for Technology Startups

Acqui-hiring can be a good strategy for start-up companies, especially those involved in technology.

Upcounsel says “a good acqui-hire can bring in a lot of new talent at the same time. Plus, the employees have experience working together as a group.” Those relationships already developed by the incoming employees can be valuable when you want to quickly gear up for a new project with them since they have already a track record of collaborating.

A major advantage of acqui-hiring is that a company with plenty of money but limited access to the level of workers it needs to thrive can get these employees all at once. Streamlining the process means you can get to market sooner.

Disadvantages of Acqui-hiring

You can anticipate there will be some obstacles along the way during acquihiring. For example, the founders of the company may be used to feeling independent, setting hours when they come and go. It’s reasonable to anticipate they will chafe at new restrictions made by the acquiring company. If your corporate culture permits, the incoming founders will be able to maintain their usual schedule, which makes for easier integration.

Keep in mind that although you will offer all new employees a signing bonus for agreeing to come along during the merger, they may quit as soon as the contract is up.

Make no assumptions about worker retention. Upcounsel points out that the purchasing company may wrongfully assume that all the workers from the new company will be happy to come onboard. “Unless the employees are under contract, that’s not something anyone can guarantee. Also, many contracts have out clauses for situations in which a competitor performs a buyout.”

Assess Cultural Differences

You will bring new employees into your company during the acquisition the same way you would handle new workers you recruited individually. This includes standard orientation meetings, onboarding classes, and introducing them to the people they’ll be working with the most closely.

Irrational Exuberance explains that “however, hiring a large batch of folks with the same cultural values is not business as usual, and requires active attention. Failure to acknowledge and address the cultural differences between the acquired and acquiring companies is the source of most post-acquisition friction, and consequently the cause of most failed acquisition.”

The more transparent and open you are while speaking with people from both companies about the adjustments to come during the transition, the better chance you’ll have of a smooth merger.

Growing with Acquihiring

As your enterprise expands services or offers new products, bringing new talent onboard quickly will be essential for getting to market first and establishing your position as a leader in the industry.

A bold move like acquihiring gives you the talent you require under your roof now. You accomplish this important task by deploying one asset – cash, that you have more of than another crucial asset that you currently lack—the time that would be needed to recruit employees on an individual basis or to train current workers and promote from within.