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Acquihire: the mantra to retain talent through restructuring

, October 16, 2018, 0 Comments

acquihire-strategy-growth-marketexpress-inThe world swirls every day with news about two things-merger and acquisition. These days another smart restructuring tactic of competitors is – acquihire. The term seems quite innovative and new, though there is much more to it which in itself is well thought of. Acquihire is a strategy of competitors to acquire a company and its manpower without taking possession of the products or services. In short, it is referred to  -acquiring talent of an enterprise for a price.

Now the question arises, Why acquihiring and why not anything else. Obviously, there are certain inherent benefits attached to acquihire:

  • The company gains easy entry into the market and its continuity is ensured for quite some time
  • The talented workforce can engage themselves to develop unique products, design services, upgrade processes and generate fresh ideas
  • It does not involve extra cash payout to the new hires
  • The company gets on board highly skilled employees at an affordable cost who does have the power to improve the earning potential
  • The services of worthy employees are received rather than undergoing huge cash payout involved in the case of a merger or acquisition

Acquihire is the buzzword not only with the corporate giants, but also with startups alike. In one of the scorching summer months of 2016, both co-founders of the online lending marketplace, KountMoney approached one of its largest rival Lending kart. The reason for such a gritty stance is because KountMoney though managed by two smart millennial’s, to scale up it was in need of funds. After rounds of frantic meetings it was suggested by co-founders of KountMoney to be acquihired. Although the suggestion came easy, the transition took a couple of months to happen.

Anyone of you ever wondered why acquihiring takes place? These are the probable reasons cited after much scrutiny:

  • If some big firm in the same industry buys out the talent and expertise of a smaller firm rather than letting it close down, its failure is ruled out and the deal is declared to work out
  • Acquihiring is not treated as a defensive strategy wherein it allows a cash-rich firm to hire employees of another firm without negotiating much on their salaries, which eventually turns out to be a rational way to have new employees on board
  • Some of the global corporations like Twitter, Dropbox, etc practiced acquihiring to enhance their worker base
  • To run large projects, sometimes it is the need of the hour to hire a huge lot of people which requires setting up an entire office, but at the end, it turns out to be a feasible option

Read more: Challenges in MSME Funding: The Ideal Roadmap

Letting the discussion hover around the benefits of acquiring makes it imperative to delve deeper to help understand the way the huge businesses take the decision of acquihiring its smaller contenders. Before a buyer firm ventures out with the acquihiring deal, the following considerations need to be made:

  • The bigger firm must ensure that it buys out the small firm in its entirety or else the acquired company may have chances of getting liquidated
  • Impact of Acquihiring on Board of Directors must be favorable
  • Limiting the post-acquihiring liabilities to the minimum
  • Take opinion of an independent analyst/expert who assesses the payout as fair

Some exemplary acquihirings that took place in 2018:

  • Digital payment company Paytm acquihires smart savings management startup Balance.Tech
  • Online Healthcare Ayurveda startup NirogStreet acquihired one of the largest social and professional community of Ayurvedic doctors, Brahm Ayurved
  • Knowledge sharing platform Vokal has acquihired quizzing app firm StupidChat Technologies