Mergers, Acquisitions, and Corporate Restructurings

By Patrick A. Gaughan | Go to book overview

13
JOINT VENTURES AND STRATEGIC ALLIANCES

As we have seen, a merger with, or an acquisition of, another company can be a costly endeavor but may provide great gains for the companies pursing the deal. It may also be the case, however, that many of the gains that the participants hoped to achieve could be realized without having to do a merger or an acquisition. It may be possible that these gains can be achieved with a joint venture or a strategic alliance. In this chapter we will explore these two options as alternatives to mergers and acquisitions (M&As). We will consider their respective benefits and costs and then compare these to M&As. We will see that in certain instances, companies are better off with an alliance or joint venture; but in other cases such deals will not achieve a company’s goals, and it will have to focus on M&As.

As with our discussions of M&As, we will review the shareholder wealth effects of both joint ventures and strategic alliances. We will see that the studies of the market’s initial reaction, like those of M&As, can provide great insight into whether a deal will ultimately be beneficial.


CONTRACTUAL AGREEMENTS

Even before discussing joint ventures and strategic alliances, we should first consider a simpler alternative to an alliance or joint venture—a contractual agreement between the parties. If the goals of the relationship are specific and can be readily set forth in an enforceable contract between the parties, then this may be the least costly and most efficient solution. As an example, consider a company that is concerned about sources of supply and is contemplating an acquisition of a supplier to lower the risk of availability of inputs for its production process. It is possible that these risk-lowering benefits could be achieved by a long-term contractual agreement between the company and a supplier. The company may not need to create a strategic alliance or a joint venture to get a supplier to commit to providing specific products and services. However, when the products in question are not readily available and require a specific development commitment on the part of the supplier, a contract may or may not suffice. If the process is even more complicated and involves the parties exchanging valuable and proprietary information as well as a buyer providing funding for the supplier to engage in a long-term and uncertain development process, such as what often occurs between biotechnology and pharmaceutical firms, then a contract may not be enough and either a strategic alliance or a joint venture may be needed, if not an outright merger or acquisition. We would expect to have a contractual agreement

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Mergers, Acquisitions, and Corporate Restructurings
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Case Studies xi
  • Preface xv
  • 1 - Background 1
  • 1 - Introduction 3
  • 2 - History of Mergers 35
  • 3 - Legal Framework 74
  • 4 - Merger Strategy 125
  • 2 - Hostile Takeovers 181
  • 5 - Antitakeover Measures 183
  • 6 - Takeover Tactics 243
  • 3 - Going-Private Transactions and Leveraged Buyouts 291
  • 7 - Leveraged Buyouts 293
  • 8 - Topics in Going-Private Transactions 335
  • 9 - Employee Stock Ownership Plans 366
  • 4 - Corporate Restructuring 387
  • 10 - Corporate Restructuring 389
  • 11 - Restructuring in Bankruptcy 435
  • 12 - Corporate Governance 473
  • 13 - Joint Ventures and Strategic Alliances 523
  • 14 - Valuation 538
  • 15 - Tax Issues 607
  • Glossary 623
  • Index 631
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