Partnerships, joint ventures, and strategic alliances seem to be all the rage. Companies engaging in these activities are usually seeking leverage beyond their means, either by marrying their ideas with other people’s money or by gaining access to markets and customers not easily reach on their own. These are all good reasons.
But partnerships and alliances often have limited useful lives. Managements change on one side or the other, their interests diverge, the world changes, or frequently the arrangement just fails to create the expected value for one or both of the parties. And then divorce looms – sometimes messy and protracted depending on how complicated or intertwined the arrangement had become.
Here are a few partnership arrangement rules of the road:
- Don’t rely on a partnership or alliance as your principal business strategy unless no other avenue to market exists.
- Consider any industry precedents as a basis for negotiating the best possible governance and dispute resolution provisions up front.
- Assume the relationship will eventually break down and begin planning for its successor early on.
Expect the best but plan for the worst.