Apple values acquihire targets by the number of engineers

Posted:
in General Discussion edited May 2
Apple's approach to acquisitions is focused on smaller companies rather than big-name deals, an exploration into the iPhone maker's activities insists, with Apple valuing "acquihire" targets by how many engineers it can secure.




Apple, and many other companies with considerable resources, often enter negotiations to acquire smaller firms. While the high-value transactions get the headlines in most cases, Apple differs from its tech giant rivals in that it prefers to go for smaller acquisitions.

People who joined Apple via an acquisition or had taken part in the acquisition process said to CNBC that Apple's focus was on attaining technical staff from startups and other small entities. Apple is also thought to value companies based on the number of engineers at the firm, and how quickly it can integrate those employees into its own teams.

Though the idea of an acquihire isn't new, Apple's decision to focus on smaller firms is said to be a departure from the rest of the industry's tendency to go for bigger targets.

"We have seen companies such as Google, Facebook, Intel, and Amazon going for many billion-dollar deals," observed GlobalData analyst Nicklas Nilsson. "Apple is buying more smaller startups while others spend more on established players."

That's not to say it hasn't gone for very expensive purchases. In 2019, a $1 billion deal had it acquire Intel's modem business,

In March, GlobalData released a report claiming Apple outpaced the rest of the tech industry in acquiring artificial intelligence firms, picking up 25 from 2016 until 2020.

Apple CEO Tim Cook also confirmed the high rate of acquisitions during February's annual shareholder meeting, revealing Apple had acquired about 100 companies in a six-year period. Cook further offered this meant an acquisition took place roughly every three to four weeks over that timeframe.

The report sources explained that Apple expects discretion throughout the process, including warning staff not to update their LinkedIn profiles to say they were acquired by Apple. In one case where news of an acquisition broke, one man said he couldn't respond to any congratulations he received from family or friends due to the need for confidentiality.

Apple also doesn't tend to be interested in keeping products or services active in acquired firms, instead forcing the discontinuation of services where possible. As such, it seems that the revenue of the acquired firm doesn't really tie into Apple's acquisition decisions.

The main focus is on the technical staff at the target firm, rather than sales or support teams. Apple is said to have conditions for purchases, where certain numbers of technical employees must join Apple or the deal would be killed.

It is said that Apple would value the company based on technical employee headcounts, pricing the firm at around $3 million per engineer.

Those technical employees would receive "golden handcuffs," typically large stock packages that vest over multiple years, to prevent them from leaving after a deal completes. The package usually works well, with employees often sticking past the time when their first allotment of Apple stock is granted to them.

The process of an acquisition is also detailed in the profile, which generally starts with the target firm demonstrating to Apple's technical teams. If a team manager wants to bring aboard engineers from the firm, they bring in the mergers and acquisitions team to facilitate the transaction itself.

Rather than introduce bankers or other outside influences, the Apple M&A team undertakes the due diligence and team interviews to ensure the smooth purchase reaches closure without surprises. One source said the team was unusually trustworthy and professional, at least compared to other companies they dealt with.

After the purchase, a specialist team within Apple integrates the new employees into their new technical group.

Comments

  • Reply 1 of 6
    BeatsBeats Posts: 2,065member
    I wonder how Apple handled Beats? So many good people left Apple from that acquisition. Some weren’t engineers but powerful record execs. Jimmy Iovine for example ran Apple Music much better than that new guy. Apple Music went from the “cool” service to just another bland tech service like Amazon Music.
  • Reply 2 of 6
    elijahgelijahg Posts: 2,072member
    Beats said:
    I wonder how Apple handled Beats? So many good people left Apple from that acquisition. Some weren’t engineers but powerful record execs. Jimmy Iovine for example ran Apple Music much better than that new guy. Apple Music went from the “cool” service to just another bland tech service like Amazon Music.
    That seems to happen with a lot of Apple acquisitions, the new people don't integrate too well. Apparently everyone from the Siri acquisition left a fair while ago for example, with two of the founders leaving within 2 years of the acquisition. Unfortunate as there was obviously a lot of talent there.
    edited May 1 Beats
  • Reply 3 of 6
    Not a huge surprise that the talent may quickly leave. Apple is treating the engineers it “acquires” as an asset to use as it sees fit.  The people at these smaller companies may be quite personally invested in what they’re working on, may like being a big fish in a small pond.  If their projects are scuttled and they’re told to get with the program, what’s there to get excited about?
    elijahgjony0
  • Reply 4 of 6
    BeatsBeats Posts: 2,065member
    elijahg said:
    Beats said:
    I wonder how Apple handled Beats? So many good people left Apple from that acquisition. Some weren’t engineers but powerful record execs. Jimmy Iovine for example ran Apple Music much better than that new guy. Apple Music went from the “cool” service to just another bland tech service like Amazon Music.
    That seems to happen with a lot of Apple acquisitions, the new people don't integrate too well. Apparently everyone from the Siri acquisition left a fair while ago for example, with two of the founders leaving within 2 years of the acquisition. Unfortunate as there was obviously a lot of talent there.

    Therefore, I’m confused by this “golden handcuffs” deal. Either these people said “fu**the stocks this ain’t worth it anymore” and left or these deals are new.
  • Reply 5 of 6
    citpekscitpeks Posts: 122member
    Beats said:
    I wonder how Apple handled Beats? So many good people left Apple from that acquisition. Some weren’t engineers but powerful record execs. Jimmy Iovine for example ran Apple Music much better than that new guy. Apple Music went from the “cool” service to just another bland tech service like Amazon Music.

    Apple got three primary things from Beats:

    1) A headphone company with brand equity, and good margins.  Apple had some experience with audio accessories, but it's likely the AirPods line wouldn't be what it is without some contribution from that group, also enabling it to better compete in a growth segment, beyond EarPods (which could have been compared to bringing a knife to a gun fight).

    2) A foundation for its streaming music business, which it didn't have to build from scratch.  Apple was in denial, thinking that sales would remain the way, and slow to react to Spotify, and the market shift toward streaming.  Time was of the essence, and to this day, Spotify still leads.

    3) Two respected music industry veterans with the relationships and skill to navigate a move into the business from beyond merely being a storefront, into a member of the club.  They understood the business, and had the credibility that Eddie Cue lacked, and probably opened doors that he could not have.

    Was that worth $3B?  How much time and money would it have cost Apple to replicate any, or all of the above on its own?
    edited May 2 jony0
  • Reply 6 of 6
    mr lizardmr lizard Posts: 231member
    So what’s Apple doing with all these AI engineers it’s been hiring over the years? Not improving Siri, clearly. 

    Is this just to stop competing ideas and products turning into meaningful competition? Given Apple forces the closure of the acquisition’s product or service, I wonder how much more vibrant and competitive the landscape would be if those ideas had come to fruition.  
    elijahgjony0
Sign In or Register to comment.