In today’s business landscape, acquisitions are the most familiar type of transaction. In a traditional acquisition, the primary goal is to gain ownership of the company’s assets. These assets may be tangible, like products, services, customers, revenue streams, or market share. But, they can also be intangible like intellectual property.
However, there has been a recent movement towards “acquihiring,” where rather than the parent company purchasing the business, they are buying human capital. Essentially, these companies are buying the talent of the businesses rather than the content within their businesses.
The process of acquihiring differs from the traditional acquisition model. The real focus is in an asset sale or asset purchase, where the asset is the team. If a company is small and struggling, it is in the benefit of a parent company to purchase the team without the liability of purchasing a whole company.
What to Know As The Acquihirer
When acquihiring a team, the buyer must look beyond the transaction’s headline and thoughtfully plan for the human, legal, financial complexities involved. Because the value is in the people and their collaborative dynamic, structuring retention incentives is critical. Examples of these incentives include tying part of the consideration to equity that vests over time or requiring personnel to “revest” shares so that continued commitment is rewarded. Plan fallback arrangements for if some members depart prematurely.
Integration considerations must also take center stage: role clarity, cultural fit, and career growth pathways should be defined in advance to avoid turnover. The buyer should also carefully analyze the target’s capital structure when it comes to who owns what, any investor rights or approvals needed and whether the equity holders’ expectations align with your offer.
Diligence in an acquihire can be unexpectedly complex, as small or early-stage companies may lack clean documentation, formal contracts, or clear ownership records. Given that risk, deal structure should be tailored to manage liabilities, tax consequences, and jurisdictional employment law.
Lastly, engage legal, tax, and employment counsel early so you full understand local labor law, tax liability, and structuring constraints.
What to Know As The Acquihired
From a seller’s perspective, an acquihire presents both opportunities and risks. Because these deals are typically about people rather than products, the buyer may structure the transaction around acquiring the team and limited assets, leaving the seller to resolve what remains. So, it is essential to clarify what is actually being transferred and compare it to what is being left behind. Investors can recover less than they originally contributed, so it is important to manage expectations. While an acquihire can feel like a last resort when fundraising or scaling proves difficult, it can preserve team value and create a softer landing compared to winding down. Sellers should weigh the acquihire against possible alternatives and prepare clean records to facilitate diligence and maximize certainty in the deal.
Recent Examples of Acqui-hiring
Acqui-hiring has been especially prominent in the Big Tech space, with three major acquisitions: Microsoft’s acquihire of Inflection (Microsoft hired almost all of the employees of AI startup Inflection in 2024); Amazon’s acquihire of Adept (AI startup Adept agreed to license its tech to Amazon in 2024, with the co-founders and team members joining the Amazon team), and Google’s reverse acquihire of Character.AI. ($2.7 billion agreement that granted a non-exclusive license to use the technology, bringing back renowned AI expert Noam Shazeer to the company).
While a monumental stride for the Big Tech giants, these types of acquisitions are leaving start-ups as shells, stripping away the brains and legal rights behind the very technologies they’re selling. Because acquihiring is enabling already dominating companies to continue dominating their respective fields, these types of acquisitions also implicate antitrust laws. Traditional acquisitions are subject to months of review and public disclosures, only to be faced with rejection. Acquihiring, however, appears to have less regulatory scrutiny, with the same outcome of controlling the space. If acquihiring allows for these mammoth companies to take over the fields with less regulatory scrutiny, it will stifle innovation.
Conclusion
In sum, acquihiring reflects a modern shift in dealmaking that places people, rather than products, at the center of value. Its advantages lie in enabling companies to secure specialized talent quickly, foster, and preserve cohesive teams that might otherwise disperse. At the same time, acquihiring is not without drawbacks. The practice raises antitrust questions when used strategically to neutralize potential competitors, and it can leave investors and stakeholders dissatisfied if financial returns fall flat. Ultimately, acquihiring highlights both the promise and the pitfalls of talent-driven acquisitions: it can be a powerful tool for growth when used responsibly, but one that requires careful attention to legal, financial, and human consequences.
Contribution to this blog by Sofia DiNatale.
Photo by Mina Rad on Unsplash
