Why is 'Acquihires' getting popular?

The competition for the best talent is fierce these days, particularly in the IT sector, where there are fewer top candidates than the market requires. To address this supply-demand imbalance, businesses have begun to employ more creative methods  with their acquisitions, such as acqui-hiring. Acqui-Hiring is the process of purchasing a company in order to secure its personnel.

Despite a high number of successful deals in the past, the idea's sudden popularity can be attributed to a variety of factors, including:

1. Fierce Competition

Fundraising is a challenging aspect of starting any business. While initial investments are heavily scrutinized by investors and necessitate patience, raising additional investments necessitates even more scrutiny and patience. The value created by an M&A can provide a plethora of opportunity and accelerated growth for startups and other small businesses. You can increase your revenues and customers, bring in new technology and knowledge, share resources, and cut costs where necessary, whether you are a buy-side or sell-side company. An M&A could provide the opportunity to strategically scale up while ensuring long-term benefits.

2. COVID-19's Impact

The pandemic compelled businesses to digitize. Digitization necessitated the implementation of efficient systems for day-to-day operations as well as data security. This increased the demand for skilled IT personnel, resulting in an unavoidable gap between demand and supply of tech labor. Many companies saw this as an opportunity to acquire startups in data analytics, product development, data security, and other areas in order to optimize their overall operations and costs. These were majorly acqui-hire with the acquisitions taking place for niche skillsets around data science, cloud, analytics, digital twin, digital engineering, AR/VR, IoT to name a few.

 3. It Saves Time

As we all know finding the right person for a job is both expensive and time-consuming. It would take even longer for a company to appoint an entirely new team for entirely new projects. Acqui-hiring would be one of the quickest ways to hire a large number of employees with proven skills in such a scenario. This method also saves the time that would have been required to train employees if the company had used traditional recruitment. Acquired employees already have the necessary skills and have worked together, which increases comfort.

4. Removes Competition

This is a great method to pursue for companies looking to expand into new verticals or business offerings. Acquihire is also useful when a company identifies gaps in its supply chain that can be filled by a smaller company. They can assemble an entire team, as well as the necessary leadership and existing supply chain or customers, to expedite the growth process.

In India Alone, Over 250 Acquihires Occurred In 2021

GrowthPal is a one-of-a-kind digital investment banking firm in India with an AI/ML-powered deal origination platform. We've been in the industry since 2020, making it easier for both mid- and large-sized companies to engage with early- or mid-stage startups to explore small size acquisition & acquihire opportunities.

With over 12,500 companies reached, and over 1000 hours spent speaking with over 1,200 sell-side companies in many different sectors such as new-age technologies, consumer goods, EdTech, FinTech, Healthcare, IT, Cybersecurity, and Digital Marketing, Growthpal is taking every step to make Acquisitions and Acquihires an easy process for both the buy and sell side, and has closed 8 acquisition and acquihire deals in a short period of time.

The rise in popularity of acqui-hiring was unavoidable due to the pandemic & the advent of digital transformation.

Conclusion

The pandemic may have harmed most industries, but it has only boosted the global tech industry exponentially. Acqui-hiring has its own set of advantages and disadvantages, but it is unquestionably here to stay. It can be a blessing for both parties when the deal goes as planned or a curse when things don't go as planned; however, the risks are worth it. It has become essential for large corporations to consider this method, as well as smaller companies that are looking for a swift exit . If the challenges encountered in deal closure are addressed and resolved, we see that the reasons for the rise in popularity are sufficient to predict that the hype will rise even higher in the near future.