Semantically Defining Technology Acquisitions
The word “acquisition” is, for a few key reasons, a very important word in the startup ecosystem. An acquisition provides an exit for shareholders. The overwhelming majority of startups fail, and the overwhelming majority of that small minority which survive are, in fact, acquired by another entity. In this context, the majority of acquisitions are a mark of success, especially given the likelihood percentages of the alternatives occurring. Initiating acquisition talks and bringing a deal to a close is a fine art, as well, oftentimes the result of a longstanding relationship.
Over the past few years, however, the rise in the sheer number of startups and fragmentation of talent across technology companies has created an environment where many early-stage founders end up being folded back into the ecosystem through transactions which are technically referred to as “acquisitions,” but in reality are a very different breed of outcome. Normally, semantics don’t matter, but lately I’ve found myself thinking about these distinctions more often because the rate of acquisitions will get so fast, it will start to water down what an acquisition really should connote. This is especially important because true acquisitions are rare and are a mark of success for those companies and founders that achieve it. It should not be watered down or used as career arbitrage.
As a result, I’ve tried to come up with every kind of possible acquisition scenario and to label or classify them so that reporters and bloggers won’t be fooled by corporate blog posts and/or parrot PR missives. Here are the three (3) acquisition scenarios I’ve thought of — and this is a working list, so please add your contribution or edit to this post in the comments:
- Acquirer buys target only for the entire team, but the target’s product/tech is put to rest. This is a “talent acquisition” or “acqui-hire.” In some cases, only a portion of the target team is given employment offers by the acquirer, so we can call this a partial talent acquisition or partial acqui-hire. ** A transaction where the acquirer hires the target’s employees and the target’s product/tech is shut down SHOULD NOT BE LABELED with the word ”acquisition.” This is simply the extension and acceptance of a job offer, perhaps with a signing bonus, and should not be construed otherwise.
- Acquirer buys target only for all of or some of the product/tech, but the target’s team is not given employment offers. While this is a rarer type of acquisitive transaction, I’d propose we still call this an “acquisition of IP,” (thanks to a commenter below) where the assets are products and/or technologies but includes no human capital.
- Acquirer buys target for both its product/tech and its entire team or parts of the team. This is what a classic acquisition should be, the one we read about in magazines. An acquisition is when Google buys and integrates YouTube, or when Apple buys and integrates Siri, or when Facebook purchases Beluga and reships it as Facebook Messenger. These types of transactions all have something similar in common: either the team and/or the product/tech was actually used by the acquirer.