Flock Defense and Joint Ventures

On the edge of the East Woods today the junco, the chickadee, and the titmouse are flitting about, displaying a wonderfully collaborative relationship – each benefits from the other while also aiding their fellow feathered friend. This is an ideal joint venture where each partner knows its responsibilities, communicates freely, and enjoys the value created. The chickadee and the titmouse knock seeds to the ground for the junco, the junco is very sensitive to oncoming threats, and together they employ the flock defense strategy.

When you are looking to grow your company by leveraging someone else’s value, you often need to wrestle with how you organize your relationship. For the birds they figured out this complex arrangement millennia ago. In order to get into the new marketplace of your dreams, your potential new partner can be acquired, the technology can be licensed, or you can join hands in a new venture. Which you choose depends on a multitude of things.

• Licensing focuses both parties on trying to make the program fruitful and consequently usually enjoys a much higher rate of success than M&A in meeting the goals. It also involves less cash up front.
• An acquisition is initially more expensive but gives you complete control and may complement your other efforts. However it does add some risk in that the transition could be messy and downsides are 100% yours.
• A joint venture is easier to construct with clear goals and takes advantages of each party’s strengths, but is much more complex to finance and manage.

So though your potential relationships involve many more factors than the nutrition and defense of the small woodland birds, it is helpful to distill the situation down to its main elements and be sure those are fulfilled – value (technology/products/assets), cash (upfront and contingent), ardor of each party, and synergy with your current businesses and functions. Once these are settled, then you can go ahead and do the hard work of building a fruitful and prosperous future with your new partner.