When is an acquisition not an acquisition? The rise of ‘acqui-hiring’
Even by Jensen Huang’s hyperactive standards, Christmas Eve is a little late in the day to be coming up with yet another deal and a rather unusual one at that.
The 62-year-old founder and boss of Nvidia said he had reached an agreement with Groq, an artificial intelligence chip start-up whose products power the usage of AI.
For a reported $20 billion, Huang got non-exclusive access to Groq’s valuable intellectual property. He also hired Groq’s key employees including Jonathan Ross, its founder and chief executive and Sunny Madra, its president.
The euphemism given to this hoovering up of Groq’s assets? A “non-exclusive inference technology licensing agreement”.
So what happens to the remnants of Groq? It will “continue to operate as an independent company”, with a new chief executive, a spokesman said. We can only wait to see what this means in practice, stripped of its original leadership.
The advantages of the nonexclusive “agreement” for Nvidia are obvious. It has neutered the competition by plucking the best talent from Groq’s offices while at the same time ensuring that there can be no exclusive licensing deal between Groq and another rival.
As Sunny Dhillon, a partner at Kyber Knight Capital in San Francisco and an angel investor in Groq, explained in a LinkedIn post: “It functions as a de facto acquisition for all stakeholders but provides a more sustainable blueprint for Silicon Valley exits.”
He said the deal was “a brilliant, creative approach to avoid the regulatory friction that traditional mergers and acquisitions face”. In other words, a way of buying parts of a company without running straight into the teeth of a watchdog.
Certainly, as competition authorities around the world keep a close scrutiny on Big Tech, this kind of “brilliant, creative” deal is becoming more common. Instead of a traditional stake, the buyer snaps up staff and intellectual property.
Just think of Meta’s $14 billion deal in June with Scale AI when its CEO, Alexandr Wang, joined Mark Zuckerberg as his chief AI officer.
But this type of “acqui-hire” deal will not be a “sustainable blueprint” for long. Regulators, including here in Britain, are watching the nexus of relationships in the world of AI closely and with increasing alarm.
Sarah Cardell, chief executive of the Competition and Markets Authority (CMA), said in 2024: “The essential challenge we face is how to harness this immensely exciting technology for the benefit of all, while safeguarding against potential exploitation of market power.”
Regulators have caught on to the various acquisition workarounds Silicon Valley is playing with. So far, with no dramatic outcome. The CMA looked into the complex partnerships between Amazon and Anthropic, and Microsoft and OpenAI, finding they did not qualify for a full investigation because neither Big Tech company was deemed to have a sufficient degree of control.
The CMA also looked at Microsoft’s 2024 acqui-hire, when it employed nearly all of Inflection AI’s staff and licensed its intellectual property to boot. While the CMA found this counted as the acquisition of an “enterprise” under UK merger law, it was cleared because it would not lessen competition.
As more such “brilliant, creative” deals emerge, the battle lines are being redrawn. Strategic partnerships, circular deals, acquihires and minority investments are all in regulators’ sights as they puzzle: when is an acquisition not an acquisition?
A spokesman for Nvidia said: “We haven’t acquired Groq. We’ve taken a non-exclusive license to Groq’s IP and have hired engineering talent from Groq’s team to join us in our mission to provide world-leading accelerated computing technology.”
‘Nvidia has neutered the competition by plucking the best talent from Groq while ensuring there can be no exclusive licensing deal with a rival’
Katie Prescott is Technology Business Editor of The Times
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