From an effort, risk, and cost standpoint acquisition may actually be cheaper than wholesale poaching while allowing most people on the other side of the transaction to save face which may have its own long-term benefits in the tech business.

I'm guessing that most acquihires deal have a clause preventing you from leaving the company ASAP. Or at least an incentive to make you stay with the company (shares, yearly bonus, etc.). I don't think google will buy a company XM$ and see them leave right after.

Another point is that the acquiring is not "hostile". This is a deal between the startup/team being acquired and the large company so they weighed their options and chose to accept the offer - i.e. they want to work for the big company or are interested in the project they are being offered.

There is a lot of threads here on HN describing that talent is hard to find in technology and it's understandable to acquire a team that already work well together and produced something concrete.

One last thing was a comment by pg here : http://news.ycombinator.com/item?id=4366621 saying that "The article doesn't mention one of the most important reasons companies do HR acquisitions: competition forces them to. If company A offers to acquire a startup and company B merely offers to hire the founders, all other things being equal the founders will take company A's offer."

I am a firm believer in the idea that the most important asset that a company can have is its employees - even Google. Granted - acquiring a company and forcing the employees to work within the Google system is a piss-poor way of getting someone to work for you, but ultimately, how else can you get those crazy entrepreneaurs to work for you?

This acquire-to-hire plan backfires all the time - under performance, stagnation of the acquired product, etc etc, but I can see the appeal to it. At least, in theory.

1. There's real value to calling it an acquisition, to both the buyer and seller, though mostly to the founding team who can now claim they were "acquired" which is better than saying "I got shut down and got a new job somewhat related to the company I started." Buyer can also tout themselves as "consolidators" within an industry.

2. Usually, deals like this no more than $100K in additional cash will get pushed to founders and/or key employees each, which seems like a lot but assuming the founders and key employees are deemed REALLY good engineers, paying a recruiter for them could be upwards of $20K each, and if you treat the rest as a bonus it's not more than say, how much a 3rd year investment banker gets as a bonus, so it's expensive but not outrageous.

3. Investors want to say they have an "exit." The really confounding thing is why the investors would or should get any $$, though they often do. I understand the reasons (founders want to treat them well, the VCs may threaten a lawsuit if they are not), but it still seems pretty weird and unnecessary. I think it mostly has to do with companies having too much $$ and stock valued too highly =)

An acquihire is generally a buyout of the team, not the technology, the product, or its business prospects. As the team, I would think about how uniquely skilled you are in the domain for which you're presumably being acquihired. Think about your own BATNA, but also think about the acquirer's BATNA. How many yous are out there? How crucial is your team to the acquirer's business objectives? Do you have a sense for specifically why they want you? Is it to build out a new business practice or vertical strategy? A new product? Are you better qualified to do that than the market at large? How much better? How long would it take a deep-pocketed company to assemble a comparable team?

Many (most?) acquihires are indeed VC-mediated. The rest are usually because a team has managed to distinguish itself as a uniquely valuable and concentrated source of talent or domain expertise, such that finding an alternative on the open market, or building one internally, would take a lot of time, money, and false starts. In that case the acquirer's corp dev team probably has a specific calculus it uses to value acquired teams versus building new ones, multiplied in some way by the business upside of the domain or skill in question. If your team operates in a domain with major or mission-critical upside to the acquirer, expect a more generous offer. If your team operates in a nice-to-have, but supporting or uncritical domain for the acquirer, you have less leverage.

If the company is flatlining, why arent acquirers just poaching talent and paying no regard to investors? Why is investor return on a product/service that the "acquirer" will not support or that they don't even care about part of the equation?

Is it because acquirers don't want to alienate investors who may have great cos for them in the future? That's what I've heard but that seems like a soft justification to me. There is a much smaller pool of acquirers than investors so while an investor might not be happy with an acquirer poaching from his prior portfolio company, it doesn't seem they'd walk away from a future acquisition if the economics made sense.

Genuinely curious as to logic of acqui-hires from the acquirers perspective as the conversation suggests investors have some leverage in these discussions when it seems logically that they'd have none.

FWIW, I don't think acqui-hiring is only about getting a team that is relatively cheap for their output. Regular hiring processes are also not cheap and by buying an entire company you can "hire" several devs in one shot (and at a lower risk) where it might otherwise take much more time to find that much extra capacity.

Any acquisition involves a lot of turnover. Guaranteed that this turnover is built into the models they use when evaluating acquihires. Consider how expensive most company's talent acquisition costs are though (upwards of $100k+ per candidate hired for top talent) and it starts to make sense.

Assume for a moment that acquiring companies don't understand what organizational practices/structures make the companies they're acquiring productive. (If they did, they'd just build an internal team that does things that way.) Assume that, instead, "acquisitions" are basically a feudal transfer of power: a different knight is now collecting the taxes from the serfs, but neither the new nor the old knight understands how wheat is grown. The serfs are a black box, and a fragile one. If they want to continue to bring in taxed wheat, they have to mostly leave the black box to its business, rather than poking around inside it trying to change things they don't understand.

Under this paradigm, you can sell a co-located team to an acquirer, and it'll retain most of its productive value, because it's very easy to just "leave the serfs to their work": you just keep the same people working together in the same office. But you can't really sell a team with mostly-independent foreign subsidiaries to an acquirer, since the process of absorbing those subsidiaries into the corporate structure will naturally (for legal + political reasons) tend to force restructurings of such subsidiaries. The black box would have to be taken apart—and since the acquirer doesn't trust their ability to put it back together in working condition, they just don't want to buy it at all.

As well, a colocated team can be acquihired for the purpose of pilfering specific members of that team for ones' own org, while discarding the rest. This possible use increases the saleable-asset value of such teams. A foreign-subsidiary team cannot really be pilfered in such a way, unless the acquirer happens to also have a foreign subsidiary of their own in the same country, which they'd benefit from transferring the acquired employees into.