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A form of getting acquired – Acqui-hire



Kirjoittanut: Aarno Lind - tiimistä Crevio.

Esseen tyyppi: Yksilöessee / 2 esseepistettä.
Esseen arvioitu lukuaika on 3 minuuttia.

Introduction

Getting acquired, better known as making an exit, is a dream for many entrepreneurs. Some might consider it as a signal of having made it, of the fruits of their labour finally paying off in a glamorous fashion followed by a big paycheck. 

While this is correct, it is not always the case. Companies can be acquired for a multitude of reasons. These reasons can range from eliminating competition to gaining intellectual or technological rights. 

This situation recently became relevant to me, and it came as a surprise. This was not a case of a company being bought for its boastful financials or for its huge market share, instead, I suspect it might be for a reason people rarely think about.

Acqui-hire

Acqui-hire is the term used for a certain type of acquisition. Acqui-hires are very strategic moves which involve multiple reasons. Some of the common reasons are:

  • Nullifying competition, especially smaller emerging companies
  • Acquiring technological and intellectual property such as patents and designs
  • Gaining resources and knowledge fast. Acquiring a company can be a lot faster and easier than hiring the required people separately. This is especially prominent in fields where the specific talent is not widely spread.

To help understand the reasons, it is good to look at an example. There is a very good example of this and it is very close to every Finn. 

Microsoft’s acquisition of Nokia

In Spring 2014 Microsoft was having a hard time in the mobile market. They are a tech company with not much experience making smartphones. 

Microsoft decided to acquire the Nokia phone division

What followed was a restructuring of the division and rebranding it as Microsoft Mobile

They failed at the attempt to compete even with Nokia’s resources and expertise and in 2015 admitted that the acquisition of Nokia was a failure, what followed was a write-off of $7.6 billion.

This situation is an example of an acqui-hire, but at a large scale. Microsoft aimed to quickly acquire the resources and knowledge of Nokia which would enable them to produce phones that could compete with Apple and Samsung

Even though Microsoft played their hand poorly and the acquisition failed, it still shows the strengths of an Acqui-hire. Imagine if Microsoft tried to get the same resources and same level of knowledge through regular means of hiring and company building. It would likely have taken closer to a decade and could have potentially cost even more.

Impact of getting acqui-hired or acquired in general

As the example shows, getting acquired can be a negative thing for the company, but it is not always the case, it can also be very positive. 

Pros and cons of getting acquired

The good:

More resources available. This is especially relevant for startups that have plateaued and are having trouble getting more funding. In some cases, getting acquired can be the difference between a company closing down or continuing operations.

Advancement opportunities and more growth possibilities. This applies both to the company and its people.

Money equity and stability. Getting acquired means a payday for the owners. Depending on the situation, the people of the bought-out company may get a stable salary and shares from the buyer. In some cases, getting acquired might allow the founders to take on a more stable, employee-like role in the acquirer company, which might be a welcomed change for some founders.

The bad:

Loss of control. Getting acquired usually means that the decision-makers at the former company lose that ability. Instead, they might have to go along with the new company’s vision and goals which could be a hard pill to swallow for the founders.

Potential layoffs. Getting acquired also means that the new company might see some people as unnecessary after the acquisition given that they might have these resources already from their end.

Cultural clash. Especially in the case of an acqui-hire, the people of the acquired company might not fit in to the new company. This might result in potential conflicts and resignations. 

Conclusion

Getting acquired is a good milestone for any entrepreneur to have but it is important to keep in mind what the reasons are when an offer like this comes your way.

Sources

Nokian merkitys Suomen kansantaloudelle yhä suuri, Yle, 2007
https://yle.fi/a/3-5797090#:~:text=Nokian%20osuus%20Suomen%20viennist%C3%A4%20oli,tehd%C3%A4%C3%A4n%20Nokiassa%20tai%20Nokian%20tilaamana.

SO YOU’RE BEING ACQUI-HIRED, Danielle Naftulin, 2022
https://www.cooleygo.com/acqui-hire-basics/

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