sometimes when a big company buys a small company it is said they did it not so much for the company itself but for the employees. i’ve heard this quite a bit over the years but never understood it. what stops the employees from simply going elsewhere? what guarantees are made to ensure the employees don’t all go to work with a competitor as soon as the deal is finalized?
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Inconvenience. Hundreds of people probably couldn’t all find a job in a day. Let alone arrange for relocations, selling homes and buying new ones, moving schools for their children, etc, etc.
Consider that on some scales of industry, there are often zero local competitors. If you go big enough, a factory might have a while township built around it. I live near a town like that. For people to change jobs without changing professions in that town, they’d need to move away.
Nothing stops most employees from leaving.
Executives or key employees at the acquired company may sign employment contracts as part of the acquisition, but that’s unlikely for low level employees.
What’s likely to stop anyone from *wanting* to leave is gobs of cash. It’s not uncommon for the hired employees to get large stock grants from the larger company, but with a 1 year cliff and 4 year vest.
So Google acquires my company and gives me, a lowly software engineer, $1 million in Google stock, but I get nothing if I quit (or am fired) before the year is over and I don’t get the full $1mm unless I stick around for the full four years
The employees can, and often do, leave.
If the acquiring company wants to hold on to them, they often try to make deals that make it worth their while: promotions, more pay, bonuses, stock options, assurances that they will get more money for their own projects, etc. This actually works well, at least for the short term.
For many of the employees, there is nothing… but the acquiring company may offer some sort of retention bonus, or vesting of shares employees hold in acquired company might take time so its in their best interest to stay until those reach maximum value. Typically only the CEO or other top level employees would have a contract outlining their obligation to remain once company is acquired.
But also, the intellectual property and codebase, etc. would remain with the company so even if some of the programmers, designers, etc. leave their past work would remain with the company.
Say, you and your friends are a great team and you start a company. You work hard and achieve some success, but in the end you are not profitable enough.
A bigger company offers to buy you out. This comes with a downside, you are no longer the CEO, you can no longer work the way you want but the big company is successful. They have better deals with suppliers, so they have a better overall margin and pay higher salaries than what you paid yourself and your friends before.
It’s different, but the new job situation worked out in your favor. The new owner also benefits, they acquired a team AND a business unit at the same time. Building this from scratch would have taken a lot longer.
Think of this as acquiring a successful team, not hiring individuals. Yes, employees can quit, but this is also applies to people hired regularly. Also, chances are they like their team and unless the culture change is dramatic, why would they leave?
My company just went through that. We were bought for 350M USD while doing only 20M profit yearly. They said they wanted our knowledge/tech.
Too bad they did it half assedly and 1/3 of our company left along with several of theirs.
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