Structuring an acquihire

What’s the difference between an acquihire and an acquisition? The term “acquihire” is used when a company is purchased for its personnel and their unique skillset. In a traditional acquisition, the acquirer is getting a combination of product, revenue and customer base. In an acquihire, a talented, cohesive team is the rare and sought after commodity.

 

With the cost of engineers in Silicon Valley skyrocketing, some acquirers are willing to pay upwards of $1 million per head for highly specialized technical employees. Acquihires are typically used to either offset the cost of expensive development or as a way of hiring a qualified group of employees that the acquirer could not otherwise get. A set of specialized technical skills adds more value to the team members and the potential premium of an acquihire exit.

 

Acquihires can be options for smaller technology companies that need a quick exit. However, the structures for those exits need to be navigated carefully. If you have outside shareholders, they must be satisfied before the lucrative employment agreements are negotiated for key team members. If there is an earnout component, careful thought must be given to how the team will integrate into the parent entity. Acquihires may be structured with up-front cash, stock options, earnout, or even a high-value employment agreement. The best way to drive a fair deal is to run a thoughtful, comprehensive competitive process that positions your team and company to multiple buyers. 

Posted by , Executive Vice President on 27 October 2015
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