Apple values acquihire targets by the number of engineers
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.
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.
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