Partnerships, Commercial and Strategic Benefits
Partnerships are meant to accelerate growth and improve the prospects of your business- 3 things to consider.
Company acquisitions can benefit both parties, but care must be taken when considering the possibility. Depending on their size and priorities, acquiring companies may have different strategic imperatives. And companies that are being acquired should weigh the value of such partnerships, depending on their own success or lack thereof.
We’ll address the three criteria to consider when partnering at the close of the piece.
Those of us who spend time planning and executing technology-company acquisitions tend to heed the advice that we should always run a company as if we’re going to own it forever; otherwise, we will wind up owning it forever. There’s a great deal of wisdom and experience behind this advice, as the success of a company and its business model depends on its ability to profitably deliver long-term value in the market. But there are many circumstances under which companies are bought and sold, including financial conditions, investor dynamics and major market developments. And as always, qualitative elements such as familiarity and likability also come into play.
All of these factors collectively influence timing, process, terms and, ultimately, the price a willing buyer is willing to transact. There’s a significant difference between what one would consider a successful sale of a company and one that isn’t. Interestingly, deliberate consideration of a potential M&A exit that supports (but does not drive) a company’s strategic and operational decisions can actually help accelerate its success as an independent entity and provide it the exposure to improve its acquisition prospects over the longer term.
Demonstrating success in the marketplace is probably the most important determinant of a company’s attractiveness as an acquisition target. Of course, not every business that develops into a successful company is acquired. Some companies, obviously, achieve tremendous success independently, ultimately providing their investors liquidity through an IPO.
Although the actual statistics vary around the percentage of small companies that grow and continue to operate, as well as the percentage of those that IPO, the numbers tell us that these success scenarios are in the extreme minority. So, for a company to continue its business and operational legacy or to provide its investors with liquidity, it will likely have to be acquired.
Three Things to Consider When Partnering
Here are a number of principles to adhere to when looking to leverage partnerships to build business and improve the probability of meaningful successful dialogues:
- Partnerships are meant to accelerate growth and improve the prospects of your business. Spend time understanding where the best partnerships might lie from the perspective of the customer first. Focusing on serving the customer is the best way to find partners and align interests, raising the probability of success.
- Avoid exclusive partner relationships that make you overly dependent on any one party.
Some partners can come to have a disproportionate influence on sales and operations. Although large, exclusive partnerships are a means to further accelerate growth in your business, those larger entities may come to be more demanding of the partnership both from an operational and financial perspective, making it more challenging to grow the business outside of them and potentially diminishing future value potential. Multiple partner relationships across the same or different dimensions can in the end have a greater impact to the business over the long term and create more of a market for the company.
- Structure and operate partnerships to truly demonstrate capabilities.
To succeed commercially and engender strategic interest, a partnership needs to be meaningful and go beyond a simple press release. Meaningful partnerships are those that have an alignment of objectives, periodic measurements and a commitment for continuous improvement of results. While many large companies have very specific and rigid guidelines for participation in partnership programs, there’s nothing that precludes any one company to stand out simply by being more proactive with communication, feedback and with the overall management of one’s side of the relationship. These are the companies that can come to stand out amongst others.
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