Companies mainly hire through their HR department but there are two other tools available. The first one is to use an external recruiting firm and the second one, you guessed it, is to buy a company.
Probably 90%+ of all hiring is done through HR, <9% through recruitment firms, and <1% through acquihires.
Let’s understand the three methods in more detail.
1) Hire through HR
Let’s think about the cost of hiring by assuming one week of full time work is needed to find and interview one great candidate. Then, the cost can roughly be estimated to ~$4,000/hire assuming $200K cost/annually for an average employee. The cost numbers looks high for a European company but about right for a tech.-company in the US. This is anyway, by far, the cheapest way to hire.
2) Hire through a recruiter
Once again, let’s explore the cost. A recruitment firm is typically paid two to three monthly salaries for a successful hire. This means, with the same assumptions, you pay ~$50K for a hire, ~12 times more expensive than when you hire through the HR department. The premium is payed for speed and expertise. If the own department is understaffed or missing knowledge to interview for a specific role a recruiting firm can be used to quickly meet that need.
3) Hire by acquiring a company
The cost can be anything from free to paying multiple months of salary in retention bonuses plus money back to investors. Also, time needs to be invested from HR, M&A, and legal to execute on the deal. The main advantage of this method is the possibility to get an entire team at once, potentially with expertise you are missing in the organization.
By this comparison, it is not obvious why you would buy a company for hire. So why do it?