Acquihire
An acquisition primarily to hire the team, not to acquire the product or customers.
Definition
An acquihire is an acquisition where the primary motivation is to hire the target company's team, not to acquire its product, technology, or customer base. Acquihires typically happen when a startup has failed or is struggling but has talented engineers or other specialists. The purchase price is usually low, often structured as retention bonuses for key employees rather than payouts to shareholders.
Why it matters
In an acquihire, the purchase price is often barely enough to cover liquidation preferences, meaning common stockholders (employees) receive little or nothing for their shares. The real compensation comes as retention bonuses or new equity grants from the acquirer.
Example
A struggling startup with 15 engineers is acquihired by Google for $15M. After $12M in liquidation preferences, only $3M is left for common stockholders. However, each engineer receives a $500K retention bonus and new Google RSUs over 4 years.