Strategic Alliance Transactions
A strategic alliance is a collaborative agreement between two companies designed to achieve some strategic goal. Strategic alliances include international licensing agreements, management contracts, and joint ventures. In the technology sector, strategic alliances usually involve a combination of cross licensing and technology transfers but they can involve joint development and joint marketing agreements under a complex arrangement.Typical Technology Sectors
Strategic alliances are appealing
to competitors in high-tech sectors where a wide range of
technical resources and abilities are required to bring advanced
new products to market, especially where previously disparate
industries are beginning to merge. An example is where
the mobile telephone started to encroach into the video and
entertainment business--mobile telephone companies formed
These alliances will become increasingly common in all technology sectors as corporations realize that pooling and collaboration arrangements can help them leverage shared marketing channels and R&D resources.
Typical Organizations
The most successful relationships
are formed where two large multinational corporations of
comparable size and market power agree to collaborate and pool
resources and seem to work well when they share common competitor. Alliances can
quickly fall apart when the two partners are of highly unequal power
and size as the imbalance can lead to confict.
Common Concerns
Confidentiality is an issue when any corporation exposes its
trade secrets and research and development resources with
another party. NDA agreements have to be carefully negotiated
and carefully policed by the partners.The threat of future competition is another concern. As businesses alter direction and technology sectors merge, companies that were formerly collaborators can find themselves competing with each other. This can be a particular concern when one of the partners is acquired by a larger corporate entity.
Transaction Process
Strategic alliance transactions often result from executive level discussions and can be very difficult for management and intermediaries to control due to the dependence on CEO and board level involvement and approval in the process.
- Commitment to collaborate. These transactions can only take place after each of the parties has made a commitment to collaboration. Where the corporate culture remains closed, and sharing remains an alien concept, the partnering process cannot gather the requisite momentum.
- Matching process. The perfect match may be obvious in some situations but often identification potential partners can involve thorough analysis of the competitive landscape within an industry.
- Introductions and preliminary discussions. This can involve an initial meeting and high-level slideshows where each company presents itself to the other.
- Confidentiality agreements. The parties negotiate NDA agreements before disclosing confidential information.
- Pilot projects undertaken. A trial project is a good way of partners getting to know each other and establishing a working relationship.
- Strategic alliance commitment agreed. This agreement can be very high-level--often it is merely an agreement to agree.
- Specific agreements negotiated. The legal teams on each side negotiate the terms of the various agreements that constitute the strategic alliance.
- Ongoing alliance activities. This is not a discrete transaction. A multitude of activities continue to take place over time.