Apple's acquisitions have focused on small companies rather than big deals, and one study of Apple suggested that the company evaluates "acquisition" targets based on how many engineers it can acquire.
Sources say Apple evaluates acquisitions by the number of engineers they have: $3 million each
Apple and many other companies with significant resources often negotiate to buy small companies. While, for the most part, high-value deals make headlines, Apple, unlike its tech giant rivals, prefers to make smaller acquisitions.
People who joined Apple through acquisitions or were part of the process told CNBC that the company is focused on acquiring technical staff from start-ups and other small entities. It is also believed that Apple values companies based on the number of engineers it has and how quickly it can integrate those employees into its team.
While the idea of an acquisition is not new, Apple's decision to focus on smaller companies is said to be at odds with the tendency of other companies in the industry to pursue larger goals.
"We've seen a lot of multi-billion dollar deals from companies like Google, Facebook, Intel and Amazon," notes GlobalData analyst Nicklas Nilsson. "Apple is buying more small startups, while others are spending more money on mature companies."
That's not to say Apple hasn't made very expensive acquisitions. In 2019, IT paid $1 billion for Intel's modem business, IT Home has learned.
In March, GlobalData released a report claiming that Apple has outpaced the rest of the tech industry in acquiring AI companies, picking up 25 from 2016 to 2020.
Apple CEO Tim Cook also confirmed the high pace of acquisitions at the company's annual shareholder meeting in February, when he revealed that Apple had acquired about 100 companies in six years. Cook further suggested that this means an acquisition will be made roughly every three to four weeks during that time frame.
Apple wanted to be cautious throughout the process, including warning employees not to update their LinkedIn profiles, saying they were being acquired by Apple. In one case when news of the acquisition broke, a man said he could not respond to any congratulations from family or friends because of the need for secrecy.
Apple also does not tend to keep the acquired company's products or services active, but forcibly discontinue them where possible. As a result, the revenue of the acquired company doesn't really seem to be tied to Apple's acquisition decision.
Apple's main focus is on the target company's technical staff, rather than sales or support teams. Apple is said to have a condition on the acquisition that a certain number of tech employees must join the company or the deal will be killed.
Apple is said to be valuing the company based on the number of technical employees, valuing the company at around $3 million per engineer.
These tech employees will be given "golden handcuffs," usually large stock packages that vest over a period of years to prevent them from leaving once the deal is completed. The plan usually worked well, with employees sticking with it long after their first allotment of Apple stock.
The process of evaluating an acquisition, which is also detailed in the introduction, typically begins with a presentation by the target company to Apple's technical team. If team managers want to bring in engineers from the company, they bring in the M&A team to facilitate the deal itself.
Instead of bringing in bankers or other outside influences, Apple's M&A team conducted due diligence and team interviews to make sure the deal went smoothly and without surprises. 'At least compared to other companies they deal with, the team is incredibly trustworthy and professional,' one source said.
After the acquisition, a team of professionals within Apple integrated new employees into their new technology team.