Acqui-hires is the term used to
describe a business acquisition strategy of acquiring another firm
primarily for the skills and expertise of their staff.
Although aqui-hire is mostly associated with Silicon Valley tech
firm acquisitions, many accountants and lawyers are familiar with
Aqui-hire concepts as they see their own firms and competitors
effectuate mergers to access specialized talent.
Acqui-hires require careful consideration and planning since the
principal asset is highly skilled people. Skilled worker-based
firms can have markedly different cultures which may not mix well
despite each firm being successful on a stand-alone
basis. Many acquiring businesses, however, have good
reasons for integration, such as achieving economies of scale or
developing a more interactive workforce culture. These types
of integrations should be addressed carefully.
New Due Diligence Tools
Linkedin, the professional networking
application, enables acquirers to preview the technical
backgrounds of the acquirees team even before approaching the
company. Instantly accessible connection patterns can
quickly present diagrams of individuals’ networks and contacts so
it becomes more apparent what the specific backgrounds are of the
acquiree's staff. However, deeper due diligence and in-person
meetings are critical to determining if the firms potentially
fit. Standard due diligence templates are a good start but
managers should not rely on them. Ultimately, any successful
due diligence plan will be narrowly tailored toward the people of
the business and industry.
Another potential problem is the
retention of talented employees. Since a true acqui-hire is
a purchase of really talented employees, retaining those employees
is often key to a successful investment. Acquirers should
have a well-thought-out plan to retain employees. Monetary
incentives are always helpful but there are additional ways to
discourage departure as well. Managers should interview employees
to determine their concerns and reservations. Those issues
should be discussed and creative solutions should be
considered. Positive reinforcement can significantly boost
morale and inject confidence into the workforce as well.
Tax Credit Opportunities
Tech-based firm acquiree's present
multiple new opportunities based on recent changes in the
Research & Development (R&D) tax credit legislation
enacted in the Protecting Americans for Tax Hikes (PATH) Act of
2015. The R&D tax credit is now permanent tax
legislation which for the first time enables an acquirer to
include multi-year estimated tax benefits of the R&D tax
credit in their financial acquisition ROI models. Acquirees
that have experienced tax net operating losses may have trapped
R&D tax credit carryovers that can be monetized by the
acquirer. Moreover, effective January 1, 2016, R&D tax
credits can now be used to offset the alternative minimum tax
which previously presented a barrier to utilizing the credit for
many growing companies.
Acqui-hire Owners Nearing
Many companies become available to
potential acquirers because the owners are nearing retirement age
and there is no alternative succession plan in place. An
acqui-hire can be attractive to a founder who is mostly concerned
with retirement planning. These companies may be available
at favorable purchase prices if the selling owners are interested
in receiving payments of unfunded retirement benefits or a
comparable way to provide retirement earnings.
Aqui-hires present an excellent opportunity for many acquirers.
With a less than 5% employment environment and shortage of certain
skilled workers, we should expect to see more Acqui-hires in the