Share the costs, share the risks and deal with uncertainty- that’s one definition of an Alliance!

By FH Cooper | Leave a Comment

But it is not limited to one definition. Alliances also can serve to leverage core competencies or as an alternative to in-house development. Some companies even use an alliance as a pre-acquisition test before committing to a formal merger.

A Win-Win for Both Parties is Essential

The key to a successful alliance is how it is constructed. Here are some considerations that might be found on such a checklist:

• Both companies must be focused on the same objective
• Each of the parties must have the flexibility to meet changing circumstances
• The alliance MUST have the wholehearted support from senior management
• It must maintain excellent internal and external communications
• It must have compatible corporate cultures
• The “point people” from each company must be of peer ranking, preferably officers or senior management
• Most importantly measurable goals must be established for each of the parties so that the degree of progress can be measured and mutual goals reached within an appropriate time

NOTE: If one party benefits within a short period of time, there is little incentive for them to continue work on behalf of the other party

The creation of new opportunities by combining skills and resources of both partners will enhance internal development and add value to the company. One of the benefits of a successful alliance is the ability to let each company become more familiar with their counterparts so that if a merger is negotiated, the integration would go more smoothly than it would have otherwise.

The most delicate part of forming an alliance is an effective operations and management support program. Engaging a third party is recommended so that it can help both parties keep their eyes on the target, share the costs, and reduce risks for win-win results