Generally a formal structured agreement undertaken in

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Generally a formal, structured agreement - Undertaken in response to rapid advances in technology, globalisation, intense competition on local market, regulatory changes and shorter product life cycles - Address the challenges and opportunities posed by the changing climate - Opportunity to gain knowledge on a new industry before engaging in more serious M&A transactions - Types of Strategic Alliances: 1.) Collisions between Competitors Two strong, direct competitors form an alliances based on core competencies Often short lived due to competitive tensions Generally fail to achieve the set goals due to “guarded” approach by both firms 2.) Alliances of the Weak Two weak companies join forces in hope of improving their market share & financial performance Often found that the weak get even more weak causing alliance to fail 3.) Disguised Sales A weak firm joins forces with a strong firm in hope of improving performance Often short lived and the weak is acquired by the strong and dissolves 4.) Bootstrap Alliances A weak firm joins forces with a strong firm in the hope of improving performance Weak improves to a point that it becomes an equal to the stronger firm Develops into an alliance of equals 5.) Evolution to Scale 3 | P a g e
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Two strong and initially compatible partners create an alliance Some succeed in meeting objectives and even exceed the expected lifespan of 7 years Often competitive tension builds and one partners sells out to the other 6.) Alliances of Complementary Equals Alliance between complementary and compatible companies Leads to a mutually beneficial relationship that will last longer than the average 7 year lifespan - As with joint ventures, strategic alliances don’t always succeed - Fail due to improper planning and failure to set clear goals. Franchising - Entrepreneurs who have established successful business models can grow them through franchising - An agreement that enables the franchisee to use the name, reputation and business format of the franchisor - Specifies the roles and responsibilities of both parties - Benefits for the Franchisor: Ability to grow their business while still maintaining control - Benefits for the Franchisor: Gain access to an established name Gain access to training programs Managerial and marketing support Advantageous buying arrangements with the suppliers On-going support - Better suited for labour intensive businesses Mergers & Acquisitions to Restructure Organisation & Management of Company - The following are M&A transactions that are undertaken to restructure the organisation and the management of the company: 1.) Equity Carve-Out these are very similar – learn the differences 2.) Spin-Offs 3.) Divestitures 4.) Issuing of Tracking Stocks Equity Carve-Outs - Refers to a transaction in which a parent (holding) company offers some of the subsidiary’s ordinary shares to the general public.
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