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Growth through Acquisition (Acquisition Analysis (Cost-Benefit Analysis),…

- - - - Advantages
        
        many different forms from straightforward (R&D, marketing partnership or distribution arrangement) to more complex (freestanding joint venture: 2 independent businesses form a new legal entity to accomplish a certain objective
        
        potentially less resource intensive up front than M&A
        
        act as a precursor to M&A, similar to test drive opportunity to try things out a little bit, maybe ends up making that acquisition
        
        access a strategic partner's complementarities
        
        complementary products or services
        
        opportunity to sell, market & deliver more together
        
        utilize partner's capabilities
        
        don't have to develop those skills, capabilities & know-how knowledge in house, rather benefit from each other's capabilities & strengths
      - Disadvantages
        
        more complex than an arms-length contract
        
        more commitment than just a standard vendor agreement with suppliers
        
        revenue sharing (dividing gains instead of keeping in house
        
        sharing control (risk of goal incompatibility)
        
        be not the only deciding party
        
        disagree on how to market the product or different sales channels
      - Acquisition or Alliance?
        
        management must decide which factors (resources or control) are most important to determine which is the optimal path forward
        
        compared to an acquisition, a strategic alliance is often less resource intensive but provides lower levels of control
        
        strategic alliances are less risky & less expensive
        
        Successful Acquisition requires clarity about how it'll create more value and enhance the firm's valuable competitive position
- - - - Independent Value + Value added
        
        Value added
        
        how to create more value by acquiring that business
        
        how long & how difficult to integrate it
        
        increasing synergies increases the strategic benefit & value creation
        
        Independent value
        
        value independent of the acquisition itself
        
        at least as much as the discounted cash flows