Electronic copy available at: http://ssrn.com/abstract=2040924
[A] lot of acquisitions that we make at Facebook are, you know, we look at great entrepreneurs out
there who are building things. And often, the acquisitions aren’t even to really buy their company or what they’re doing. It’s to get the really talented people who are out there trying to buildi
ng something cool and say, you know, if you joined Facebook, you could work on this completely
different problem. Isn’t this a more important problem? And for the people who answer that question yes, they join. And that’s how we’ve had the most success
Facebook, Google, Zynga, and other large technology companies in Silicon Valley are buying start-up companies at a brisk pace.
In many of these transactions, the buyer has little interest inacquiring the start-
projects or assets. Rather,
primary motivation is to hire some orall of the start-
software engineers. After the transaction, the buyer redeploys the newly hiredtalent onto its existing projects and jettisons the start-
up’s existing projects
These types of
acquisitions are known in the tech world as “acqui
Given the prominence of the companies that regularly engage in acqui-hiring, it is notsurprising that this phenomenon has been a topic of frequent discussion on blogs and other websites.
What is surprising is that, to date, the acqui-hiring phenomenon has attracted noattention in the academic or professional legal literature.
This neglect is striking because acqui-hiring represents a novel
and increasingly common
tool by which the most successfultechnology companies satisfy their intense demand for engineering talent. It is also striking becauseacqui-hires raise a host of interesting issues across a wide range of topics that are relevant to lawyers
Mark Zuckerberg, Interview by Charlie Rose with Mark Zuckerberg, Founder, Facebook, and Sheryl Sandberg, COO,Facebook, in Palo Alto, Cal. (Nov. 7, 2011),
Google Inc., Annual Report (Form 10-K), at 72 (Jan. 26, 2012) (79 total acquisitions for the fiscal year endedDecember 31, 2011); PrivCo Media LLC,
Facebook, Inc. Private Company Financial Report
37-38 (2012) (11 total acquisitionsfor the fiscal year ended December 31, 2011); Zynga Inc., Annual Report (Form 10-K), at 71-72 (Feb. 28, 2012) (15 totalacquisitions for the fiscal year ended December 31, 2011);
New Tech Spenders in Feeding Frenzy
, May 14, 2012 at B1 (describing accelerating acquisition activity by Silicon Valley buyers in 2012).
For Buyers of Web Start-Ups, Quest to Corral Young Talent
17, 2011 at A1 (“Companies
like Facebook, Google, and Zynga are so hungry for the best talent that they are buying start-ups to get their foundersand engineers
and then jettisoning their products.”).
Some commentators refer to this phenomenon as an “acqhire” or a “talent acquisition.”
technology blogs call it being ‘acqhired.’ The companies doing the buying say it is a talent acquisition.”).
Nate C. Hindman,
The Top 15 Tech ‘Acqui
, May, 7, 2011, athttp://www.huffingtonpost.com/2011/05/29/acqui-hires_n_867865.html#s283726&title=Facebook__Dropio;Michael Arrington,
Some Investors May Request Protection from Acqui-hires
Apr. 24, 2012, athttp://uncrunched.com/2012/04/24/some-investors-may-request-protection-from-aqui-hires; Patricio Robles,
Is the acquihire really a smart strategy?
, Oct. 28, 2011, at http://econsultancy.com/us/blog/8201-is-the-acquihire-really-a-smart-strategy.
A recent search for the term
hiring” (and several variations in spelling) in law reviews, bar journals, and other
legal periodicals on Lexis and Westlaw generated only two hits. One was a reprint of the New York Times article citedin supra note3,which briefly described the phenomenon. The other was an article co-authored by one of us,
Gregg D. Polsky & Brant J. Hellwig,
Examining the Tax Advantage of Founders' Stock
, 97 I
1085, 1097-99 (2012), which briefly and preliminarily addressed the tax implications of acqui-hiring, which are explored in greater depth in PartIII.E.