A few days the US CIS tightened the qualifications for international tech talent seeking the H-1B ‘genius visa’ into the US. The visa program added 13,000 programmers to the US tech workforce in 2016, at an average salary of $72,000 according to Bloomberg. While the tightening is overdue – it’s been 17 years since the last version – it does require employers to prove the job is more ‘complex’ before a visa is granted. Inevitably this is already seen as part of a trend by the current administration to ‘hire American,’ and so the issue the trend being ever more restrictive.

Meanwhile US tech companies have $1.2 trillion parked overseas; while they face a 35% tax if these profits come home, the cash is staying put. Negotiations to enable a special low-tax repatriation ‘corridor’ remain just that.

We believe this combination of H-1B tightening (not this change, but the trend-line overall) and locked overseas cash offers US tech companies an irresistible motivation to accelerate international talent acquisitions. Such tech team ‘acqui-hires’ have featured for many years, often involving smaller companies valued at perhaps $10-30m. Most of Google’s 2016 deals for example were small acqui-hires.

It is our view that the pace of international acqui-hires could ramp significantly in the next 2-3 years. Our thinking is as follows:

  • Clearly the drivers for large company ‘demand’ are there based on the above, and we believe they will only become more pronounced as the current administration turns its hire-American rhetoric into consistent policy changes.
  • In terms of supply, Europe has more developers than the US, according to Stack Overflow Insights; 4.7m vs 4.1m to be precise. Europe is also home to half the world’s top 10 engineering schools, guaranteeing a source of world-class future supply.
  • Many European tech companies now get Series A funding, but as we have reported before European companies find it incredibly hard to find late stage money to grow large businesses. As a result promising firms can deliver solid returns to their employees and investors by being acquired ‘early’ by a US tech major hungry to add talent.
  • Finally, while currency does not drive fundamental decisions, it surely can help. At $1.25/£ UK companies in particular look awfully ‘cheap’ now versus 2-3 years ago, and developer all-in costs in most of Europe are a fraction of what they are in Silicon Valley. And that’s before we consider huge differences in employee turnover, where a stable European tech team can become far more valuable over a 5-10 year period.

We believe the stage is set for a record number of $30-100m deals which are fundamentally acqui-hires plus some critical intellectual property. Given today’s sentiments, this could be one of the best investments US tech majors could make.

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