Partnership Decisions
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A presentation evaluating partnership choices available to companies today and the factors the companies evaluate while deciding upon the path right for them.
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Partnership Decisions
- 1. Partnership Decisions Join Ventures, Strategic Alliances and Mergers & Acquisitions Akhilesh Agarwal Mrunmayi Deshmukh Joe Blazick
- 2. Akhilesh Agenda Mrunmayi JoeJV, SA, M&A Thinking like an Investor Decision Triangle NBC - Fox - Disney Stock Market Reactions Stock Price Anomalies Starbucks - Barnes & Noble Sources of Synergy AB InBev - SAB Miller Pfizer – Allergen The US Treasury The Cardinal Rule
- 6. Thinking like an Investor Geography Equal Control Company A Company B Weak Links
- 7. Decision Triangle Revenue enhancement Market Gains Cost Reduction Tax Benefits Economies of Scale Patents/Technology Low Risk Profile Combining strengths M&A JV SA
- 8. NBC, Fox and Disney NBC UNIVERSAL T E L E V I S I O N D I S T R I B U T I O N
- 9. An Online Streaming Service
- 12. Market Anomalies Recent News Bargain
- 13. Starbucks and Barnes & Noble
- 14. Sources of Synergy Strategic Advantage Market Power Economies of Scale Lower Taxes Efficiency A B C D E F G H 1 2 3 4 5 6 7 8
- 15. Anti Trust Laws Sale of Assets AB InBev & SAB Miller
- 16. Their Policy of Appeasement
- 18. The Treasury’s Power Serial Inverters Inverted US Company New Foreign Parent Company Loans Tax Deductible Interest Payments 3 Year Look-back
Editor's Notes
- 1 minute
- In a joint venture the companies start and invest in a new company that is jointly owned by both of the parent companies.
- A strategic alliance is a legal agreement between two or more companies to share access to their technology, trademarks, licenses, patents or other assets. It does not create a new company.
- Mergers and Acquisitions are often confused. Mergers happen when two companies agree to legally combine into one company, melding their management. Or it can be an absorption in which one of the companies survives.
- Geographic Consideration: Both cross-border alliances and cross-border acquisitions are good vehicles for international strategy and have similar success rates. But that doesn’t mean they are interchangeable. Acquisitions work well for core businesses and existing geographic areas. Alliances are more effective for edging into related businesses or new geographic markets.
- They all rely on the same factors but it the level of commitment that changes.
- In structuring alliances, the issue of financial ownership should be separated from managerial control. Alliances with an even split of financial ownership are actually more likely to succeed than those in which one partner holds a majority interest. When one parent has a majority stake, it tends to dominate decision making and put its own interests above those of its partner, or for that matter, of the joint venture itself. Both partners tend to be worse off as a consequence.
- It stands to reason that alliances between two strong partners are a safer bet than alliances between two weak partners. But many strong companies actually seek smaller or weaker companies to partner with in order to control the venture. Weaker companies often seek a strong partner to get them out of trouble or to build their skills. Our analysis suggests that these strategies do not work well because the “weak link” becomes a drag on the venture’s competitiveness and causes friction between the parents. Alliances in which one partner is consistently strong in the functions it brings to the venture while the other is not strong succeeded only one-third of the time. When one partner is weak, managing the alliance seems to be too great a distraction from improvements needed in other parts of the business. When unbalanced partnerships do succeed, it is usually because the strong partner brings the capability that is crucial to the venture; it pulls the weaker partner along for a while before acquiring it or finding another partner.
- Why such a high premium? 1. To comply with anti trust laws 2. They would get a part of their investment back by selling off assets to downsize.
- 1. Companies that have acquired assets over the last 3 years aren’t counted. 2. 40% rule – own 40% to enjoy the full tax benefit
- Don't piss off the government!