When companies are looking to quickly ramp up their human capital in a particular competency, one solution is to acquire or merge with an existing player in that field. While this option isn’t feasible for everyone—smaller businesses may not have the resources to purchase another company or even to afford the considerable legal and regulatory expenses associated with such a move—big companies frequently acquire smaller businesses in order to obtain their valuable human capital.
But what if a company tries to obtain a big influx of talent without jumping through all the hoops that come with an actual merger or corporate acquisition? As Microsoft is finding out, there’s often not a clear line between large-scale hiring and a merger.
Blurred Lines
“Microsoft is being investigated in the UK over whether it has effectively merged with an artificial intelligence (AI) start-up firm by hiring its staff,” according to an article by BBC. “Key employees at Inflection AI left the company in March to join the tech giant, with co-founder Mustafa Suleyman becoming head of its new AI division. The Competition and Markets Authority (CMA) said it would investigate whether this constituted a merger, and if so, whether it could lessen competition.”
The software giant with find out in a matter of weeks if it can move past the CMA’s review and proceed with its hiring spree or if it will be subject to a more scrutiny. “If the CMA finds that there is enough evidence to suggest there has been a ‘merger’ between Microsoft and Inflection that could lessen competition, it will progress to a more in-depth investigation,” notes the BBC. “It says it will make a decision on whether the transaction should be cleared or investigated further by 11 September.”
Be Aware of Risks
While most businesses don’t have the purchasing power of Microsoft, it’s worth noting that large-scale staff grabs from one company by another might not always be taken at face value by regulators. That’s particularly important for multinational corporations—subject to multiple regulatory jurisdictions—to keep in mind. The ultimate decision of the CMA will likely serve as a warning, if not a strong precedent, for similar moves by other organizations in the future.
Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.
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