In today’s complex business world, organizations often find value in working together to achieve a specific goal by pooling resources, sharing research or otherwise combining their strengths in service of a common interest. There are multiple models for structuring these partnerships, including joint ventures, asset-sharing arrangements and strategic alliances.
Formation and Operation of Strategic Alliances
A strategic alliance differs from a joint venture or the formation of a new entity in that it is less formally structured and often of a lesser duration. Each company in a strategic alliance continues to operate as an independent organization.
The specifics of the arrangement vary by industry, by the goals of the organizations involved, and by the knowledge and resources that each has to offer. According to a recent study by PricewaterhouseCoopers, the key drivers behind the formation of strategic alliances in the United States are:
- Access to new and emerging technology
- Strengthening innovation
- Access to new markets
- Access to new customers
- Access to talent
- Opportunity to strengthen brand or reputation
- Sharing of risks
- Sharing of resources
- Access to new industries
- Portfolio optimization
- Accounting and tax rule changes
Traditionally, these types of advantages have often been pursued through mergers and acquisitions. However, strategic alliances are emerging as a more flexible, more collaborative means of sharing risks, knowledge, processes, accessibility, and other resources.
Complexity of Strategic Alliances
Strategic alliances offer the opportunity for flexibility that can benefit each of the organizations involved. However, that same effort to keep options open can complicate the relationship and lead to conflict as the alliance progresses. Thus, it is important that the parties give full consideration to a wide range of issues before entering into an agreement; this way, each of the businesses joining forces has clear and accurate expectations.
In particular, it is critical that the parties are clear on:
- The scope of authority of each with regard to the joint effort
- The degree of access to and control over resources of the other party such as intellectual property
- The ability of one or more parties to veto or override decisions of another
- The degree of control each party will have over the resulting product or innovation
- Allocation of profits resulting from the effort
Working with a law firm that is experienced in the structuring and operation of strategic alliances will enhance your ability to fully consider and address key aspects of your alliance in advance, and to create an agreement or agreements that fully and clearly reflect(s) your intentions.
Strategic Alliances Require Careful Planning
To help ensure the best outcome from your joint undertaking, we will:
- Guide and/or assist with due diligence with regard to potential partners
- Help create a clear statement of your goals
- Negotiate on your behalf or advise you during negotiations
- Ensure that you are prepared for unplanned eventualities
- Create mechanisms for managing conflicts and setbacks
- Draft an agreement that clearly reflects your intentions
In addition, our experienced attorneys will explain other considerations specific to your particular goals, industry, and alliance.
Joint Control Alliances
Strategic alliances may operate in a variety of manners, including a structure within which each organization operates autonomously and manages its own contribution to the effort. In other cases, however, there may be joint control of some or all operations. In such cases, it is important to create specific structures for such operations and decision-making, including:
- Leadership and decision-making power
- Management systems
- Confidentiality measures
- Compliance management
- Reporting procedures
- Benchmarking and measurement
- Dissolution procedures
In addition to spelling out such procedures and allocations of power and responsibility in order to avoid conflict or litigation and keep the operation running smoothly, there are technical financial issues to consider. These include accounting procedures and taxation issues.
Experience Counts in Forming a Strategic Alliance
Our attorneys are experienced not just in the formation and operation of strategic alliances, but in all aspects of commercial operations. We can help you structure your alliance from beginning to end. Our goal is always to ensure that your alliance is as successful as possible, and that we have taken every measure necessary to ensure that you can focus on your end goal rather than being diverted by unnecessary conflicts, confusion, or even litigation.
From assisting you in identifying and vetting the right partner or partners to the execution of your exit plan, our experienced attorneys will be at your side every step of the way. Give yourself and your project the benefit of knowledgeable guidance. Contact KPPB LAW for more information.
