Imagine not being invited to the office party — one where attendees are gifted with swag bags containing millions of dollars. That’s the position two employees of chipmaker Groq found themselves in when mega-sized rival Nvidia hired most of their colleagues. Selective guest lists may work for elite soirées, but they’re not so well suited to corporate M&A.
Nvidia paid $20bn to get what it wanted from Groq. Rather than a traditional acquisition, it set aside a $3bn bonus pool to lure Groq’s top talent and paid $17bn to license Groq’s intellectual property. The disgruntled engineers, as shareholders, got their cut of that $17bn but less than if Nvidia had bought the company outright. They have therefore sued Groq’s board.
So-called “acqui-hires” are one way of buying the guts of a business without triggering antitrust processes. In practice, they can leave shareholders feeling as though they have lost prized human “assets” without being compensated adequately. The big question is whether acqui-hires will come to be treated as mergers from a competition standpoint.
The Biden administration reviewed thousands of similar arrangements. The Trump administration has expressed concerns too. The objections of irked former employees add a new challenge. If they win, future acqui-hires will probably become more expensive, and thus less attractive.
Source: Financial Times Companies · Summarized by HeadlinesBriefing