Strategic Partnership: How to Ensure Your Mutual Growth is Synergistic


Many companies reach a point where their growth has reached a plateau. Finding new markets or procedures to get past this plateau can be difficult. One option may be to pursue a strategic partnership. If handled properly, a strategic partnership can help a company grow in new directions.

For companies, looking to develop a new markets, bringing in a strategic partner may offer a good solution. But keep in mind that a strategic partnership is a lot like marriage. To make it work, you have to go into it with your eyes wide open and have a long-term strategy for prosperity in view.

Preparing for the Partnership

A strategic partner can give much more than money to your company’s success. Such an alliance might also give manufacturing or technological know-how, marketing agreements that give you access to new products or distribution channels, or contacts with key players.

On the downside, if you are a small firm, consider whether your entrepreneurial style will mesh with a larger firm that may have a slower, multilayered decision-making process. Or, if you are a larger firm, will you be able to integrate a company with a more informal management style? These issues are important to consider because the employees, customers  and suppliers of both partners will be watching. The greatest success of other partnerships will hinge on their cooperation. The compability of the new partners will often decide the degree of employee, customer and supplier support.

Creating  a Win-Win Situation

Before a deal proceeds, you and the potential strategic partner must answer several questions:

  • Is there something in the deal for everyone?
  • If an investment is required, will the deal be financed primarily with debt or equity? With debt, the new partner may settle for a lower return than that required by investors concerned with recouping large equity investments.
  • How do participants’ needs fit the business goals of the deal?
  • How will existing management take part in the reorganized company? Will you keep the management team from only one company, or will you create a new management team with members from both groups?
  • Does the partner want more leverage or control than you consider prudent?
  • What is the rate of return requirement, and how is it achieved?
  • Are the potential new partners knowledgeable about the industry?
  • How long has the potential investor kept other investments or stayed involved in other partnerships? Some expect to sell their shares quickly?

Making the Right Decision?

While pursuing a strategic partnership may provide a good way for your company to grow, judging the various aspects of a strategic partnership isn’t easy. You have to live with the partner you choose. Therefore, finding potential partners whose skills, goals and reputations complement your own is crucial for success. Take your time, and make the “courtship” a test of your future relationship.

Please feel free to share your experiences here with strategic partnerships that worked well or not so well.

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