Acqui-hire questions show up in M&A interviews specifically because they break the instinct to reach for a revenue or EBITDA multiple. If you're asked to value a talent-driven acquisition, here's the framework interviewers are listening for.

Step 1: Recognize Why Standard Multiples Don't Work

Say it out loud before you start calculating: the target has little or no revenue, so EV/Revenue and EV/EBITDA multiples are meaningless here. This signals to the interviewer that you understand why the approach has to change, not just that you know a different formula.

Step 2: Build Value Bottom-Up from Talent and IP

Two components make up the deal value:

  • Talent-based value: number of engineers × a market cost-per-engineer benchmark (what it would cost to recruit each person individually).
  • IP / technology value: a standalone estimate of the codebase or patents, often via a build-vs-buy replacement-cost lens.

Add the two together for the total deal value.

Step 3: Split Consideration Between Upfront Cash and Retention

Don't stop at a single headline number — interviewers want you to structure it. A portion is paid upfront in cash for the equity itself; the rest is held back as a multi-year retention pool (typically unvested RSUs or deferred cash) that vests only if the engineers stay. Divide the retention pool across the team and the vesting period to get the annual "golden handcuffs" figure per employee.

Step 4: Know the Accounting Wrinkle

A detail that separates strong answers from average ones: upfront consideration flows into the purchase price allocation and goodwill, but retention payments tied to continued employment are expensed as compensation over the vesting period — not capitalized. That's worth mentioning even if the interviewer didn't ask about accounting directly.

See It Worked Through with Numbers

For a full numerical walkthrough of this exact framework — a 15-engineer target, a cost-per-engineer benchmark, an IP valuation, and a 40/60 upfront-retention split — work through Case 68: Tech M&A — Acqui-Hire and IP Acquisitions. If you want to go deeper on how the purchase price gets allocated to goodwill once a deal like this closes, see Case 60: Purchase Price Allocation (PPA).