4 ms·

Question for the Valley types: If I'm Facebook and I want to hire a talented team at a smaller company why would I go though the whole procedure of an acqui-hi

by slyall 13y ago

Question for the Valley types: If I'm Facebook and I want to hire a talented team at a smaller company why would I go though the whole procedure of an acqui-hire? If I just want the 10 programmers why don't I offer them each a $500k signup bonus ( total $5m ) rather than pay $20m to some VCs and investors for a company and product I'm going to throw away?

JonFish85 13y ago
My guess (and it's just that: a guess) is that it has something to do with a non-compete clause with their current employer. If these programmers are working on a substantially similar product to one at your Facebook example company, there might be a lot of legal reasons not to leave the smaller company to go work at FB.
- 001sky 13y ago
  There are limited situations where a reasonable non-compete agreement may be valid in California. If an owner is selling the goodwill in their business.[14] When there is a dissolution or disassociation of a partnership.[15] Where there is a dissolution of a limited liability company.[16]*
- walshemj 13y ago
  Which is not enforceable for grunt engineers in virtually all cases. And if in the rare case it is enforceable (normally for very senior C level roles) you have to be paid for it! Hint Marissa didn't have any problem walking from Google to yahoo did she
  - gohrt 13y ago
    Non-competes are unenforcable. NDAs and theft-of-trade-secrets are enforceable.
    - walshemj 13y ago
      Courts in CA tend to side with the employee though.
rizzom5000 13y ago
One guess is that the management at FB (to use your example) are more interested in acquiring the leadership component of the team than the 10 programmers. They want to hire the visionaries, the folks who did the grunt work get to come along for the ride.
- beagle3 13y ago
  Actually, many companies are interested in a proven knows-how-to-work-and-make-a-product team, and would gladly pay some premium for that.
- gohrt 13y ago
  That's certainly not true; entrenched players at big companies have no interest in aquiring more bigwigs to compete with. They want to a hire a bunch of staff who have produced a work sample that shows that they are a much safer bet than an equivalent number of unknown new hires.
kitcar 13y ago
Few different alternative reasons: Capital gains are generally taxed at a lower rate than bonuses/salary - therefore in after-tax cash terms a $500,000 signing bonus is not the same as selling shares for $500,000. Potentially different tax treatment from the acquirer side as well. Also - Investors are commonly the ones that orchestrate the talent acquisitions - therefore they want to get their share of the pie. Also - shareholders of public companies perceive acquisitions differently than large salaries, both in technical terms (i.e. where the transaction appears on financial statements) as well as psychologically speaking. Also - its potentially more complex to negotiate individual hires, especially if its a large team. (i.e. Some employees may choose to walk away from an individual hire - maybe the employees you really want. They don't really have that luxury if the deal is dependent on all-or-nothing)
- jeffasinger 13y ago
  Also, if the products are too similar, you can't just poach the entire team, because that would probably run afoul of NDAs.

by slyall 13y ago

JonFish85 13y ago

My guess (and it's just that: a guess) is that it has something to do with a non-compete clause with their current employer. If these programmers are working on a substantially similar product to one at your Facebook example company, there might be a lot of legal reasons not to leave the smaller company to go work at FB.

001sky 13y ago
There are limited situations where a reasonable non-compete agreement may be valid in California. If an owner is selling the goodwill in their business.[14] When there is a dissolution or disassociation of a partnership.[15] Where there is a dissolution of a limited liability company.[16]*
walshemj 13y ago
Which is not enforceable for grunt engineers in virtually all cases. And if in the rare case it is enforceable (normally for very senior C level roles) you have to be paid for it! Hint Marissa didn't have any problem walking from Google to yahoo did she
- gohrt 13y ago
  Non-competes are unenforcable. NDAs and theft-of-trade-secrets are enforceable.
  - walshemj 13y ago
    Courts in CA tend to side with the employee though.

rizzom5000 13y ago

One guess is that the management at FB (to use your example) are more interested in acquiring the leadership component of the team than the 10 programmers. They want to hire the visionaries, the folks who did the grunt work get to come along for the ride.

beagle3 13y ago
Actually, many companies are interested in a proven knows-how-to-work-and-make-a-product team, and would gladly pay some premium for that.
gohrt 13y ago
That's certainly not true; entrenched players at big companies have no interest in aquiring more bigwigs to compete with. They want to a hire a bunch of staff who have produced a work sample that shows that they are a much safer bet than an equivalent number of unknown new hires.

kitcar 13y ago

Few different alternative reasons: Capital gains are generally taxed at a lower rate than bonuses/salary - therefore in after-tax cash terms a $500,000 signing bonus is not the same as selling shares for $500,000. Potentially different tax treatment from the acquirer side as well. Also - Investors are commonly the ones that orchestrate the talent acquisitions - therefore they want to get their share of the pie. Also - shareholders of public companies perceive acquisitions differently than large salaries, both in technical terms (i.e. where the transaction appears on financial statements) as well as psychologically speaking. Also - its potentially more complex to negotiate individual hires, especially if its a large team. (i.e. Some employees may choose to walk away from an individual hire - maybe the employees you really want. They don't really have that luxury if the deal is dependent on all-or-nothing)

jeffasinger 13y ago
Also, if the products are too similar, you can't just poach the entire team, because that would probably run afoul of NDAs.