Saturday, March 03, 2007

Alliances: the importance of seeing the end before beginning

When negotiating a strategic alliance, few companies take the time to think about and discuss with their partners a plan for what happens when the alliance comes to an end. And they all end, sooner or later.

In an article in today's Wall Street Journal Business Insight Section, authors Ranjay Gulati, Maxim Sytch and Parth Mehrotra (link - $$) urge companies to set out the rules for disengagement with enough detail that when time comes to dissolve the alliance, most of the important questions--who retains the intellectual property, how will customers be supported, who takes ownership of tangible assets--have ready answers. Leaving these items undone, the authors argue, adds significant conflict and risk to an alliance.

From my experience, the contemplation and discussion of breakup items are the last large issues on the table before closing. The psychology of negotiations has a lot to do with it. It's hard to talk about endings when you're just getting to know each other.

But deferring the discussion till after the agreement is signed doesn't work. Then, everyone who isn't overcome by deal euphoria is working on closing business. And the shifting power dynamics of alliances make pinning down criteria post-signing a very difficult task.

So, as unpleasant as it may seem, negotiate that prenup before getting married to another company.
(Picture by rovaro via stock.xchng)