![]() The former provides control but typically requires more commitment. When developing an inorganic growth strategy, companies should be ready to determine the importance of ownership vs. In this situation, the target’s products and services could be bundled with the acquirer’s products and services. An alliance may be preferable if the target’s products and services don’t provide independent value when combined with the acquirer’s capabilities system.Those that don’t fit could be candidates for divestiture. M&A makes sense if all or most of the target’s products and services can benefit from the acquirer’s capabilities.Or a company may want to leverage existing capabilities – building on strengths with another company’s products and services. Another scenario is a company’s inability to handle an integration but desire to maintain an ongoing relationship. An example is gaining access to a new region or market that may be narrow enough that the company doesn’t want to integrate the entire target. With a partnership, a company can pursue new capabilities to benefit specific parts of the existing operations or portfolio.That could improve the potential for more value from the deal. An acquisition also allows longer-term access and the ability to integrate and maintain capabilities. An acquisition could open up all of a target company’s capabilities – including some the acquirer may not want – and be the only way to access core capabilities.Many deals are made to improve a company’s capabilities or its portfolio of products and/or services.Įnhancement can be one goal – filling a capabilities gap or responding to a change in the market. Companies also need to recognize the role of divestitures in their growth decisions, as well as situations in which M&A and partnerships both could make sense. These include important questions and distinctions about capabilities, control, cost and conditions beyond a company’s control. ![]() That’s why it’s essential for businesses pursuing growth to understand the key considerations in determining if an acquisition or an alliance is the best path for inorganic growth. CEOs, company owners and other leaders can’t afford those missteps. Each brings its own challenges along with the benefits, and choosing wrong can leave a business chasing competition, mired in financial straits or struggling in other ways. While both deal types can drive business growth, deciding whether to buy or partner with another company can be daunting. Both typically require a significant investment of financial capital, time commitment and executive oversight. ![]() Both can open the door to additional or new resources, such as technology and talent. Both allow a company to expand its reach – through access to new products or services, new geographic or industry markets, or new types of customers. Faced with different types of disruptions – technological, demographic, geopolitical – companies must keep their growth options open.Īcquisitions and alliances can achieve similar goals. Or the US airline industry, which now has only a dozen large carriers, with four controlling about 80% of the market. Consider the entertainment industry and how movies are watched now compared with 10, 25 or 50 years ago. Such shifts can make previous paths for organic growth obsolete. These types of deals have become more important as industries continue to evolve and the lines between some of them blur. Whatever the reason, choosing the right mechanism for growth is crucial.Īmong the most common paths for inorganic growth are mergers and acquisitions (M&A) and strategic partnerships, such as alliances and joint ventures (JVs). This may be a response to disruption or a proactive step to advance a company’s strategy. But getting ahead often means inorganic growth – that which comes through other actions, usually deliberate and sometimes dramatic. That can happen naturally through expanding the customer base or introducing new products and services. With few exceptions, companies depend on growth for survival and success. ![]()
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