Being ‘acquihired’ has long been a trend in the tech industry, especially in the start-up world.
For owners looking to exit their business in the near-term, being acquihired has grown in popularity and could be something to think about, a couple of years out from your exit.
ACQUIHIRING Vs ACQUIRING
Acquihiring is a strategic ‘talent acquisition’ move. In other words, it’s when a larger company acquires a smaller one, primarily for the skills, expertise and talent of its staff, rather than its products, services or anything else. But this move is not always about a full acquistion – and exit terms can be flexible.
WHAT DOES THIS MEAN FOR BUSINESS OWNERS THINKING ABOUT THEIR EXIT?
Some businesses naturally have a concentration of scarce, specialist expertise within their ranks, due to the nature of their business. Actively deciding to optimise this asset, as part of your exit strategy, can have several benefits for founders over a traditional M&A approach:
FINANCIAL PAYDAY. You still get the liquidity event, without necessarily going through a full M&A process. Your valuation may be skewed towards your talent and assets, rather than traditional revenue or Ebitda multiples.
INTACT CULTURE. Your team spirit and culture remains in one piece, which is a big part of what actually got you to this point.
SAFE JOBS. Since your people are the primary assets, acquihiring often avoids any redundancies or job losses post-acquisition.
SIMPLE INTEGRATION. Fewer business integration requirements, when compared to other more traditional exits. Your team can therefore focus much more on maintaining operations.
SPEED. Acquihiring can typically happen much faster than a more conventional M&A process, meaning a less dragged-out affair.
WOULD BEING ACQUIHIRED WORK FOR YOU?
Being acquihired can be worth thinking about as an exit, if:
> You have a strong team – your team’s skills and expertise are a core asset, so the right buyers will pay a premium.
> Your product doesn’t scale – the business may not scale easily, but your talent can be applied elsewhere in the sector.
> You’re tired of running the business – you’re looking for an exit and a liquidity event within the next 1-2 years.
KEY TAKEAWAYS
For the right businesses, being acquihired as your exit, enables you to:
> Realise a strong valuation and payout for your efforts.
> Protect your team culture under a new parent company.
> Avoid a lengthy, complex and risky M&A process.
> Focus on your next entrepreneurial venture.
This won’t be suitable for all businesses or industries, where more traditional exit strategies will remain the norm. But for SME owners considering their options and wanting to maximise their valuation, being acquihired can be an attractive alternative to conventional M&A.
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