An acquihire is a sale in which the buyer mainly wants your team, not your product. Buyers usually think about price per engineer, and much of what they spend goes to the people who join them, through salaries, signing bonuses and new equity, rather than to your stockholders. Because the founders approving the deal are often the people getting those packages, the board needs a careful, documented process. And before you agree to anything, find out whether the buyer is acquiring the company or only hiring the team and licensing the technology, because in the second case your company is left behind to pay its creditors, take care of the employees who aren’t joining and wind down.
Key takeaways
- Price is usually set per engineer, and the buyer counts everything it spends on your team, not just the purchase price.
- When the team’s packages are large and the purchase price is small, your investors may get less than their money back while the founders do well. That conflict is where the legal risk sits.
- Get the deal approved by disinterested directors or disinterested stockholders after full written disclosure of every package, under Delaware’s 2025 rules.
- In an asset deal or a license-and-hire deal, the company still exists and has to be wound down. Make sure the deal leaves enough cash to do that.
- Flag the tax questions early: whether payments are compensation or purchase price, golden parachute rules under Section 280G, and how buyer stock is treated.
What is an acquihire?
An acquihire is a sale where the buyer is paying for the people. The buyer may shut down your product the day the deal closes. The typical target is a seed-stage company that has built a strong technical team but hasn’t found the traction to raise its next round, and for that company an acquihire is often a better outcome than a shutdown: the team lands good jobs, some value goes back to investors, and the founders keep their reputation.
A newer variant, common in AI, is the license-and-hire deal. The buyer doesn’t buy the company at all. It pays for a license to the technology and hires the founders and some of the team. In 2025, Google paid a reported $2.4 billion for a nonexclusive license to Windsurf’s technology and hired its CEO, a co-founder and some researchers, while most of Windsurf’s roughly 250 employees stayed with the company. At seed stage the dollars are far smaller, but the structure raises the same questions: who gets paid, who is left behind, and who cleans up.
How do buyers price an acquihire?
Buyers start from a budget per person they want to hire, usually engineers and researchers, and compare it with what it would cost to recruit a similar team one by one. The range quoted most often runs from a few hundred thousand dollars to about $2 million per engineer. Where a deal lands depends on how scarce the team’s skills are and how much the buyer wants them, so treat that range as a starting point for the conversation, not a benchmark. That budget then gets split between two buckets. Deal consideration is the price paid for your company’s stock or assets, and it flows to your stockholders through your charter’s waterfall. Team packages go only to the people who join: salary, signing and retention bonuses, and new buyer equity that usually vests over three or four years.
The buyer generally doesn’t care how the money is split, because it’s all part of the same cost. You and your board should care a great deal, because the split decides what your investors and non-joining stockholders receive.
How is the money split between the team and stockholders?
Example. A buyer wants six of your engineers and budgets $1,500,000 per person, or $9,000,000 in total. It proposes $2,500,000 for the company’s stock and $6,500,000 in team packages, mostly buyer equity vesting over four years. Your investors put in $4,000,000 of preferred stock with a 1x non-participating liquidation preference. After $300,000 of debts and deal expenses and a 10% holdback, roughly $1,950,000 is available for stockholders at closing. All of it goes to the preferred, because it’s less than their $4,000,000 preference. The common stockholders, including the founders and every employee who isn’t joining, get nothing from the deal, while the founders who join receive a share of $6,500,000.
That result isn’t automatically wrong. The packages are pay for future work, and the buyer may genuinely refuse to pay more for the company. But it is exactly the kind of deal that leads to claims, so expect your investors to ask for some of the team packages to be moved into the purchase price, or for a carve-out that gives common stockholders or non-joining employees something. See Liquidation Preference.
Is the buyer buying the company or just the team?
| Stock purchase or merger | Asset purchase | License and hire | |
| What the buyer gets | The whole company, liabilities included | Chosen assets, usually IP, plus hired employees | A license to your technology, plus hired employees |
| What’s left behind | Nothing | Your company, its debts and its remaining employees | Your company, its IP, its debts and its remaining employees |
| Who winds down | No wind-down needed | Your board | Your board |
| Stockholder approval | Usually yes | Yes, if it’s substantially all of the assets | Often, if the license and departures leave the company with nothing to run |
If you can, push for the buyer to acquire the company itself, so that it takes on the contracts, the leases and the remaining obligations and you don’t have to run a separate shutdown. Buyers resist this when they want to avoid unknown liabilities, which is why many acquihires are asset deals. If the company will be left behind, negotiate a purchase price that covers its creditors and the cost of a proper wind-down. See How Do I Shut Down My Startup?.
Why does the board need a careful process?
In most acquihires, the founders on the board are interested in the deal. They’re negotiating their own jobs, salaries and equity with the buyer while deciding, as directors, whether to sell. Under Delaware’s Section 144, as amended in 2025, a deal involving an interested director or officer is protected from a fiduciary challenge if the material facts are disclosed and it’s approved in one of three ways: by a majority of the disinterested directors (or, if most of the board isn’t disinterested, by a committee of at least two disinterested directors), by a majority of the votes cast by disinterested stockholders in an informed, uncoerced vote, or by showing it’s fair to the company and its stockholders.
In practice, that means disclosing every package in writing to the board and to the stockholders who vote, letting the investor directors or a committee lead the negotiation over the split, and documenting that the board looked for other buyers or alternatives before agreeing. If the founders control a majority of the vote, the stricter rules for controlling stockholders may apply. See Fiduciary Duties of Startup Founders and What Do Stockholders in My Startup Need to Approve?.
What happens to the employees who aren’t joining?
The buyer will usually make offers to some of your team, and its obligation to close may depend on a minimum number accepting. Everyone else stays with your company until you let them go, and you’re responsible for them. Pay final wages and accrued amounts on your state’s deadline, give the benefits notices your plans require, and decide on severance. At an early-stage company, two to four weeks of pay is typical, and executives often get three to six months. Ask for a signed release in exchange. If the deal will lead to layoffs at a single site, check whether the federal WARN Act or a state version applies. Unvested options of employees who don’t join are handled under your equity plan, which may let them be cancelled, cashed out or accelerated. See What Do I Need to Do When an Employee Is Fired? and What Happens to Stock Options When a Startup Is Acquired?.
What about creditors and customers?
Creditors are paid before stockholders, whether the money comes from a sale or a wind-down. List every debt before you sign: vendors, the lease, customer prepayments, refunds, convertible notes and loans from founders. Review your customer contracts for change-of-control and assignment clauses, and plan how customers will be moved or shut off with notice. Directors who let stockholders or themselves be paid ahead of creditors can be personally liable.
What tax questions should I flag early?
Bring in a tax advisor before you sign the term sheet, because several issues change the after-tax result and are hard to fix later. The first is characterization: payments to founders for their stock may be taxed as capital gain, while payments for staying with the buyer are compensation taxed as ordinary income, and the label in the documents doesn’t always control. The second is Section 280G, the golden parachute rules. If deal-related payments to certain officers and larger stockholders reach three times their average recent pay (their “base amount”), everything above one times that base can trigger a 20% excise tax for the recipient and a lost deduction for the company. Private companies can usually avoid this with a separate vote of more than 75% of the voting power, excluding the people receiving the payments, after full disclosure, and the recipients have to agree in advance to give up any payments the vote doesn’t approve. The third is buyer stock: whether it can be received tax-free, how re-vesting affects its treatment, and how it affects any qualified small business stock position.
What should I negotiate before I sign?
Founders often treat an acquihire term sheet as a formality because the deal is small. Smaller deals aren’t always simpler. Before you sign, settle these points:
- Whether the buyer is acquiring the company, its assets or only a license
- The total budget and how it’s split between purchase price and team packages
- Which employees get offers, and what happens if some decline
- Cash to pay creditors, severance and the wind-down if the company is left behind
- How much of the team’s buyer equity re-vests, and what happens on termination without cause
- Holdback size and duration, and whether founders have personal indemnity exposure
- Releases from investors and stockholders, and directors’ and officers’ insurance tail coverage
- How long the no-shop lasts
For the bigger picture on selling a startup, see Startup Acquisitions: The 3 Types of Deals, Single Trigger vs Double Trigger Acceleration and Startup Due Diligence.
If you’re being approached about an acquihire, contact us before you sign the term sheet.
