Build, Borrow, or Buy. Laurence Capron

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СКАЧАТЬ for a basic contract before turning to alliances and acquisitions—which require substantially greater management time and attention. Obtaining new resources via contract requires clarity in defining the targeted resources. Likewise, you must understand how the value of the new resources will be protected (and have some familiarity with, and confidence in, the relevant legal system).

      Of course, sometimes a contract is inappropriate. But a company can’t make that judgment without first investigating the option. Recall the global investment bank that wanted to launch a private-equity service through its Eastern European unit. Its leadership team initially weighed whether to contract with a local private-equity firm. In such an arrangement, the global business would provide products, brand equity, and global coordination while the local partner would provide local investment selection, deal structuring, monitoring, and exit skills. Such a contract would have required a solid incentive structure to secure strategic alignment with the partner. Alignment was critically important because the bank alone would have dealt with clients regarding investment results, processes, ethics, and partner due diligence. Moreover, the arrangement would require the private-equity firm to hire new employees to handle tasks that it did not explicitly contract to perform. After reviewing this option, the team concluded that the transaction costs between the two parties would be prohibitively high—driven up by the extensive coordination needs and by concerns that the partners might either take advantage of the relationship or fail to execute their responsibilities fully.

      Chapter 3 will review how you can assess the tradability of your targeted resources. Tradability will help you decide when to obtain targeted resources via basic contracts, such as in-licenses and out-licenses, and when to consider more complex arrangements, such as alliances and acquisitions, with other firms.

      Question 3. How Close Do You Need to Be with Your Resource Partner?

      If your targeted resources are not easily tradable, you will need to consider an alliance or acquisition. Given a choice between those options, our message is simple: because M&A is the most complex path, reserve it only when it really pays to have a deep collaboration with the resource provider.

      Alliances can take many forms, ranging from R&D and marketing partnerships to freestanding joint ventures. Thus, alliances might be relatively simple agreements or complex relationships involving multistage contracts, cross-investments, and complicated rights stipulations. All alliances, however, rely on ongoing interactions in which independent actors—these may be competitors, complementary firms, or other organizations (such as universities and public institutes)—commit resources to a joint activity.

      Pharmaceutical companies commonly use alliances to develop and market specific drugs. In many cases, simply in-licensing the rights to a molecule would be risky because of the need to participate actively in the development process. Falling short of the intense control of an acquisition, alliances allow partner firms to collaborate on focused projects with explicit aims.

      Of course, some projects are so complicated that the level of partner interaction renders the collaboration unworkable. In the Eastern European bank unit, for example, the alliance option at first seemed promising. It combined the strengths of global and local resources and strong incentives for the local partner to work hard to expand the business. The team rejected this option—after much consideration—because the bank’s dominant motive in undertaking the strategy was to build a broad set of skills for itself and to keep tight control over the investment process. The bank concluded that the local private-equity partner would be loath to help launch a new competitor. Worse, the partner might use its close alignment to glean competitive insights for the future. There was also a secondary misgiving: most private-equity firms are unaccustomed to the stringent requirements of more traditional banks. The team feared that the structure of the joint venture would be likely to create ongoing conflicts between the partners about governance and processes.

      Paranoia is a common business condition. Many firms are simply suspicious of collaboration, often for the wrong reasons. As we noted above, many executives overvalue control—and believe that collaboration will reduce their control over resources.

      In our conversations with executives from telecommunication incumbents, many viewed alliances “as a route to diminishing our skills,” as a way “of shopping core competencies rather than sharing knowledge,” and as eventually transforming partners into competitors. Fully 80 percent of the surveyed executives shared concerns of exclusivity, control, and resource protection. Not surprisingly, 80 percent also reported that they used M&A, rather than alliances, to gain exclusive access to the firm controlling the needed resource. More than two-thirds of the executives also wanted to keep their own assets closely held, choosing M&A over alliances to protect their differentiation and unique resources.

      As you can see, alliances are often tricky to manage. Some analysts suggest that no more than 30 percent of alliances succeed in meeting the partners’ respective goals. Because alliances are almost always transient relationships, executives naturally fear the negative consequences of collaborating with a partner that might abuse them before or during the alliance or after exiting it. Those who can overcome such fears will have to actively manage alliances throughout their life cycles and easily foresee milestones and termination. Despite the risks, however, you should carefully assess the potential of an alliance before jumping heedlessly onto the acquisition path.

      Chapter 4 will help you decide how to choose between alliances and acquisitions when interfirm collaboration is needed. As we will demonstrate, alliances are most effective when relatively few people and organizational units from each party must work together to coordinate the joint activities. A limited cast of characters also makes it easier to align the partners’ incentives. But if the joint actions to obtain and develop strategic resources require deep involvement—for coordinating the use of resources or attempting to align goals, or both—you will usually benefit by considering an acquisition. You will have bought not only key resources, but also the assurance of retaining the value of their successful exploitation.

      Question 4. Can You Integrate the Target Firm?

      Before choosing the M&A path, bear in mind that acquisitions are almost always more time-consuming and expensive than even the most pessimistic scenario you could imagine. Acquisition is, for good reason, the mode of last resort—reserved for cases that don’t suit any other path. However, that doesn’t mean you must undertake an acquisition simply because you’ve analyzed and rejected the other modes.

      If you value strategic control over the targeted resources and have already concluded that less integrative modes (contracts or alliances) will not achieve what you seek from the relationship, then you must assess whether you can effectively integrate the target firm’s resources without damaging employee motivation at either firm. In our private-equity example, the team members were ultimately considering whether a skilled local target existed and was willing to sell at a viable price. They had concluded that acquisition appeared to be the optimal path. It offered the fastest way of developing a product. Unlike a team lift-out, in which a team is hired away from a competitor, an acquisition would bring the target’s full pool of assets (including reputation) to the bank. The buy mode also offered greater freedom in restructuring local operations. Finally, the Eastern Europe unit would benefit from the support of its global parent, which has strong skills in pre-acquisition due diligence and postdeal integration of new personnel and assets.

      However, the corporate development team was fully aware of the integration challenges and the importance of retaining the targeted resources. An acquisition would work only if the acquired resources could be fully leveraged to generate investment opportunities and strong investment performance. Moreover, the acquirer would have to provide value by bringing its expertise СКАЧАТЬ