|
Lift outs, or the acquisition of entire teams of employees by one company from another, are increasingly prevalent. More businesses, including those in financial services and health care, are luring groups of talented individuals from competitors instead of acquiring or merging with companies.
In fact, about 30% of analysts move in teams, says Boris Groysberg, assistant professor at Harvard Business School and co-author of "Lift Outs: How to Acquire a High Functioning Team," an article in the December, 2006, issue of the Harvard Business Review.
In the article, Groysberg and co-author Robin Abrahams, a research associate at Harvard Business School, lay out the steps to a successful lift out. The article is the culmination of extensive interviews with leaders of lifted-out teams and work groups in multiple industries and countries, analysis of over 40 high-profile moves, research into best practices as reported by headhunters who facilitate these maneuvers, and two in-depth longitudinal case studies.
Once taboo, lift outs are now a viable alternative for companies who want to avoid the headaches of a merger. "You don't want to buy the back office, you don't want to buy support people," says Groysberg. "Instead of buying the firm, you just acquire the team of individuals that has been working together a long time and works well."
Lift outs have become more acceptable, in large part, because more U.S. employees are less loyal to the company that signs their paychecks and more aligned with their direct supervisors, Groysberg says.
What are the benefits of a lift out?
One benefit is that you can buy what you really want. You don't have to buy other stuff that comes with the acquisition of a company. That makes the integration more manageable because you don't have to fire people you no longer need.
The other difference is that companies lift out teams that perform well. There are some acquisitions where a big company acquires a little company that is not doing well and then invest in them and turn around their performance.
The other difference is the price. If you have a small company that is being traded at $20 a share, you might have to pay $25 to buy it, right? We find that with lift outs there is not as much of an acquisition premium. In some cases the only premium you have to pay is to the leader of the team, so it's a less expensive proposition.
There are some groups that look at lift outs as a substitution for acquisitions. On the one hand, you can hire stars from a bunch of companies and then you must convince them to work together. On the other hand, you can buy the company, and integrating the company and the human capital inside this industry is very complicated. Lift outs are in the middle as something that might work better than acquisitions of individuals or acquisitions of companies.
What are some of the disadvantages of lift outs?
|
