What an asset sale is
An asset sale transfers specific things, typically code, domain, users and contracts, to a buyer who wants the product. Money goes to the company and is then distributed according to your cap table and any liquidation preferences.
It suits startups where the product has standalone value and the team either does not want to move or is already dispersed. It is also the faster and simpler of the two.
What an acqui-hire is
An acqui-hire is a hiring transaction wearing acquisition clothing. The buyer wants the engineers. The product is usually shut down, and much of the value arrives as employment packages rather than as consideration to the company.
That distinction matters enormously to shareholders. Money paid as salary and equity to the founding team is not money paid to the company, and investors may see very little.
Which fits your situation
The test is simple. Is the valuable thing what you built, or who built it. If the team has already scattered, an acqui-hire is not available. If the product is genuinely undifferentiated but the engineers are strong, the asset sale will disappoint.
- Team dispersed, product works, go for an asset sale
- Team intact and strong, product commoditised, an acqui-hire is likely better for the team
- Both intact, run both processes and compare, they attract different buyers
- Investors holding preferences, model the outcomes before committing to either
What each means for shareholders
In an asset sale, proceeds flow through the company and preferences apply, which in a distressed sale often means investors are repaid before common shareholders see anything.
In an acqui-hire, much of the value bypasses the company entirely. This is a recurring source of conflict, and it should be discussed with your board before negotiations progress rather than after.
Common questions
What is the difference between an asset sale and an acqui-hire?
An asset sale buys what you built and pays the company. An acqui-hire buys who built it and pays the individuals, usually shutting the product down.
Which pays shareholders more?
Usually the asset sale, because the consideration goes to the company. Acqui-hire value largely reaches founders and engineers directly.
Can I do both?
Occasionally. Some buyers take the product and hire part of the team, though it is less common than either pure outcome.